<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): February 6, 1998
IFR SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-14224 [48-1197645]
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10200 West York, Wichita, Kansas 67215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 522-4981
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 6, 1998, Registrant acquired for cash all of the issued and
outstanding capital stock of Marconi Instruments Limited., Hertfordshire,
England (collectively with its subsidiaries "Marconi") from The General
Electric Company, p.l.c. ("GEC"). The purchase price for Marconi was
$64,350,000 plus L26,000,000 or a total purchase price of approximately
$107,000,000. The purchase was made pursuant to a Share Sale and Purchase
Agreement, dated as of February 6, 1998, between IFR Systems, Inc.
("Registrant" or "IFR"), IFR Systems Limited, and GEC (the "Purchase
Agreement"). IFR Systems Limited is a wholly owned subsidiary of Registrant
formed for the purpose of making the acquisition. Registrant has changed the
name of Marconi Instruments Limited to IFR Instruments Limited and has
changed the name of Marconi's United States subsidiary to IFR Instruments of
Texas, Inc. When used herein, the term "IFR-UK" refers collectively to IFR
Instruments Limited and its subsidiaries.
The purchase price was negotiated on an arms' length basis. There is no
material relationship between GEC and Registrant or any of Registrant's
affiliates, directors, or officers or any associate of any such director or
officer. Registrant used funds borrowed under the Credit Agreement described
below to pay the purchase price.
A copy of the Purchase Agreement is filed as Exhibit 2.01 to this Form
8-K. The following description of the Purchase Agreement is intended to be
only a summary of the Purchase Agreement. Reference is hereby made to the
Purchase Agreement for a full statement of its terms which are hereby
incorporated by reference.
In addition to containing typical provisions relating to a purchase of a
corporate subsidiary for cash, the Purchase Agreement provides that IFR-UK
and GEC and its subsidiaries grant each other non-exclusive, irrevocable,
non-transferable, royalty-free perpetual worldwide licenses to use all
intellectual property belonging to any of them and being used by the other
prior to the date of the acquisition for the purpose of developing,
manufacturing, and selling existing products and any improvement,
modification or adaption of products manufactured or in the course of
development at such date. IFR-UK may not make any use of the Marconi trade
names after the expiration of nine months from the date of the transaction.
The Purchase Agreement also provides for GEC to assume the responsibility for
certain pending patent litigation and to retain any recovery received and for
GEC to assume the responsibility of bringing additional patent enforcement
proceedings with any net proceeds to be divided equally by GEC and IFR.
The Purchase Agreement contains certain representations and warranties
of GEC and provides that IFR's maximum recovery for breach of such warranties
and representations (other than with respect to GEC's title to the shares of
Marconi) may not exceed L40,000,000 (L10,000,000 in the case of environmental
matters) after reaching various threshold amounts. Claims for breach of GEC
warranties and representations must be made by December 31, 1999 except
environmental claims may be asserted prior to the expiration of five or seven
years depending on the nature of the claim.
<PAGE>
The parties also entered into a "Deed of Tax Covenant" in connection
with the Purchase Agreement. The Tax Covenant provides generally for
indemnification by GEC for tax liabilities that might be incurred by IFR (and
in certain cases for indemnification by IFR for certain losses that may be
incurred by GEC) and for the manner in which GEC and IFR will prepare various
tax returns. Claims under the Tax covenant must be asserted within seven
years.
A copy of the Tax Covenant is filed as Exhibit 2.02 to this Form 8-K.
The preceding description of the Tax Covenant is intended to be only a
summary of the Tax Covenant. Reference is hereby made to the Tax Covenant for
a full statement of its terms which are hereby incorporated by reference.
IFR-UK is engaged in the design, manufacture, distribution, and sale of
test and measurement equipment. Such equipment is sold primarily to the
telecommunications and electronics industries. IFR-UK participates in four
market sectors of the global electronic test and measurement industry: (i)
Test Instruments, (ii) Automated Test Equipment, (iii) Service, and (iv)
Solutions. IFR-UK's test equipment products sell in prices ranging from
approximately $2,000 to $40,000.
Test Instruments are items of equipment which test and measure the
performance of a broad range of electronic and telecommunications products.
The Test Instrument market is divided into a number of segments based on
products and applications. Within the Test Instruments area, IFR-UK primarily
competes in the mobile radio, signal analyzers, signal sources, lab/system
power supplies and communications test equipment markets. Customers include
telecommunications equipment producers, installers and operators, the
military and the aviation industry.
Automated Test Equipment tests and verifies the construction and
performance of assembled printed circuit boards, electronic subassemblies or
products. Customers include automotive component manufacturers and producers
of electronics.
Service entails the calibration and repair of test and measurement
equipment and third party testing facilities management.
Solutions represents customized test and measurement systems and is
currently principally undertaken by customers in-house. IFR-UK is one of the
industry pioneers in providing this service on a third party basis.
IFR-UK sales by category for the year ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
$ MILLION %
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<S> <C> <C>
i) Test Instruments 77.3 73.7
ii) Automated Test Equipment 6.0 5.7
iii) Service 15.3 14.6
iv) Solutions 6.2 6.0
104.8 100.0
------- ------
------- ------
</TABLE>
<PAGE>
IFR-UK's headquarters are at Longacres House, Norton Green Road,
Stevenage, United Kingdom, which it leases under a lease expiring in 2020.
IFR-UK owns three manufacturing facilities located in Stevenage containing an
aggregate of 144,000 square feet of manufacturing facilities and leases three
other facilities in the United Kingdom used for service, repair and
engineering development activities. IFR-UK leases its sales and support
facilities which are located in the United States, Germany, France,
Netherlands, Spain, Hong Kong and China.
As a result of the acquisition, Registrant acquired the foreign
subsidiaries of Marconi which do business in France, Germany, Spain, and the
United States. IFR-UK also has branches in the Netherlands, Singapore, Hong
Kong, and China. IFR-UK also has distribution relationships and service
centers worldwide.
In connection with the Marconi transaction, on February 5, 1998,
Registrant entered into a Credit Agreement (the "Credit Agreement") with The
First National Bank of Chicago ("First Chicago") as agent for itself and
other lenders pursuant to which Registrant has the right, subject to certain
usual and customary conditions, to borrow a maximum of $130,000,000. Of such
amount, $100,000,000 is in the form of two term loans in the principal amount
of $50,000,000 each and the remaining $30,000,000 is in the form of a
revolving line of credit. As of the date hereof, Registrant has borrowed
$100,000,000 under the term loan provisions of the Credit Agreement and
$7,000,000 under the revolving loan provisions.
A copy of the Credit Agreement is filed as Exhibit 10.01 to this Form
8-K. The following description of the Credit Agreement is intended to be only
a summary of the Credit Agreement. Reference is hereby made to the Credit
Agreement for a full statement of its terms which are hereby incorporated by
reference.
Both of the term loans are payable in quarterly installments of
principal pursuant to a schedule contained in the Credit Agreement which
calls for such payments to increase over the term of the loan.
Subject to restrictions contained in the Credit Agreement, Registrant
may choose whether the loans will bear interest either at the "Alternate Base
Rate" (a fluctuating interest rate equal to the higher of First Chicago's
base rate or the sum of the reported "federal funds" rate plus 0.5% per
annum) or at the "Eurocurrency Base Rate" (the LIBOR rate for the applicable
currency for the relevant interest period). Both of such rates are increased
by an applicable "margin" which varies up to 2.5% per annum depending on the
type of loan, the interest rate basis chosen, and the Registrant's then
current "Leverage Ratio" as defined in the Credit Agreement.
The loans made under the Credit Agreement are secured by the pledge of
all of the capital stock of Registrant's United States subsidiaries, by a
pledge of 65% of the common stock of IFR Systems Limited, a United Kingdom
subsidiary of Registrant, and by the guaranties of all of Registrant's United
States subsidiaries. Registrant and all of its United States subsidiaries
also granted security interests on substantially all of their assets
excluding real estate and leasehold interests.
The Credit Agreement contains various affirmative and negative
covenants, among which
<PAGE>
are covenants requiring the maintenance of specified financial ratios,
prohibiting dividends until Borrower's Leverage Ratio (as defined) is 2.0 or
less, restricting the incurrence of additional indebtedness, requiring the
maintenance of interest rate agreements, and certain restrictions on future
acquisitions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following financial statements of IFR-UK are filed herewith:
Condensed consolidated balance sheets at December 31, 1997 and 1996 (UK
GAAP and unaudited).
Condensed consolidated statements of income for the twelve months ended
December 31, 1997 and 1996 (UK GAAP and unaudited).
The remaining financial statements required to be filed with this Form 8-K will
be filed by amendment no later than April 6, 1998.
(b) The PRO FORMA financial statements required to be filed with this
Form 8-K will be filed by amendment no later than April 6, 1998.
(c) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.01 Share Sale and Purchase Agreement, dated
February 6, 1998 among IFR Systems, Inc., IFR
Systems Limited, and The General Electric Company
p.l.c.
2.02 Deed of Tax Covenant, dated February 6, 1998, between
The General Electric Company, p.l.c., as Covenantor,
and IFR Systems Limited, as Purchaser
10.01 Credit Agreement, dated as of February 5, 1998, among
IFR Systems, Inc., The First National Bank of Chicago,
and various lenders.
10.02 Form of Security Agreement executed by Registrant
and its United States subsidiaries.
10.03 Form of Guaranty executed by each of Registrants
United States subsidiaries.
10.04 Pledge Agreement between Registrant and First
National Bank of Chicago.
10.05 Equitable Share Charge by Registrant to First
National Bank of Chicago.
10.06 Form of Copyright Security Agreement executed by
Registrant and each of its United States subsidiaries.
10.07 Form of Patent Security Agreements executed by
Registrant and each of its United States subsidiaries.
10.08 Form of Trademark Security Agreement executed by
Registrant and each of its United States subsidiaries.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IFR SYSTEMS, INC.
By /s/ Alfred H. Hunt, III
-------------------------------------
Alfred H. Hunt, III
President and Chief Executive Officer
Date: February 20, 1998
<PAGE>
IFR-UK
CONDENSED CONSOLIDATED BALANCE SHEETS
(UK GAAP - UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
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(000's omitted)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $(1,180) $ 120
Accounts receivable 22,828 23,510
Inventory 24,656 24,472
Prepaid and other 3,758 2,700
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TOTAL CURRENT ASSETS 50,062 50,802
Property, plant and equipment - net 17,584 16,879
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TOTAL ASSETS $67,647 $67,681
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-------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $18,258 $16,505
Other liabilities 1,962 1,737
-------- -------
CURRENT LIABILITIES 20,220 18,242
Shareholders' equity 47,426 49,439
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $67,647 $67,681
-------- -------
-------- -------
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UK GAAP - UNAUDITED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
1997 1996
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(000's omitted)
<S> <C> <C>
SALES $111,762 $104,087
COST OF SALES 62,853 57,257
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GROSS PROFIT 48,908 46,830
OPERATING EXPENSES 41,731 39,381
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OPERATING INCOME 7,177 7,449
OTHER - NET 3,483 1,221
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INCOME BEFORE INCOME TAXES 10,660 8,670
INCOME TAXES 3,518 2,861
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NET INCOME $ 7,142 $ 5,809
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-------- --------
</TABLE>
<PAGE>
EXHIBIT 2.01
THIS AGREEMENT (this "AGREEMENT") is made on February, 1998
BETWEEN:-
1. THE GENERAL ELECTRIC COMPANY, P.L.C. (registered in England No. 67307)
having its registered office at 1 Stanhope Gate, London W1A 1EH ("GEC");
AND
2. IFR SYSTEMS LIMITED (registered in England No. 3491978 ) having its
registered office at 61, Brook Street, London W1Y 2BL (the "PURCHASER");
AND
3. IFR SYSTEMS INC. incorporated in the State of Delaware, U.S.A. and having
its principal place of business at 10200 West York Street, Wichita,
Kansas, 67215-8999, USA (the "GUARANTOR").
WHEREAS GEC has agreed to sell and transfer, or procure the sale and transfer
of, the Shares, and the Purchaser has agreed to purchase or procure the
purchase of them, on the terms and conditions of this Agreement, and the
Guarantor has agreed to guarantee the Purchaser's obligations hereunder.
IT IS AGREED AS FOLLOWS:-
1. INTERPRETATION
1.1 The Schedules form part of this Agreement and shall have the same force
and effect as if expressly set out in the body of this Agreement and any
reference to this Agreement shall include the Schedules.
1.2 Certain words and expressions used in this Agreement are defined in
Schedule 1.
2. SALE AND PURCHASE OF THE SHARES
GEC shall sell or procure the sale of the Shares with full title
guarantee and the Purchaser shall purchase or procure the purchase of the
Shares. The Shares shall be free from all claims, liens, charges,
encumbrances and equities whatsoever (other than those arising from acts
of the Purchaser or any of its subsidiaries or subsidiary undertakings)
and shall be sold with all rights attached or accruing to them at
Completion including, without limitation, the right to receive all
dividends, distributions and any return of capital hereafter declared,
paid or made in respect of periods commencing on or after Completion.
<PAGE>
2
3. CONSIDERATION
The total consideration for the sale of the Shares shall be the payment
by the Purchaser to GEC of the Aggregate Purchase Price, of which the
U.S. Purchase Price shall be attributed to the US Shares and the balance
to the UK Shares.
4. COMPLETION
4.1 Completion shall take place on the Completion date, immediately following
signature of this Agreement by each of the parties, at the offices of
GEC's Solicitors.
4.2 At Completion, GEC shall do or procure the carrying out of those things
listed in Part 1 of Schedule 2 and the Purchaser shall do or procure the
carrying out of those things listed in Part 2 of Schedule 2.
4.3 Neither GEC nor the Purchaser shall be obliged to perform its obligations
in respect of Completion unless the other party complies in all material
respects with the requirements of sub-clause 4.2 and Part 1 or 2 of
Schedule 2.
4.4 Neither GEC nor the Purchaser shall be obliged to complete the sale and
purchase of any of the Shares unless the sale and purchase of all the
Shares is completed simultaneously. This sub-clause shall not limit any
other clause of this Agreement and in particular clause 12 (Remedies and
Waivers).
5. GEC'S WARRANTIES AND UNDERTAKINGS
5.1 Subject to clause 7 (Purchasers' Remedies and GEC's Limitations on
Liability) and Schedule 4, GEC warrants to the Purchaser in the terms of
the Warranties at the date of this Agreement but gives no further or
other warranties.
5.2 Subject to paragraph 2.2 of Schedule 4, each of the Warranties shall be
construed as a separate and independent warranty.
5.3 (A) GEC waives and will procure that other members of the GEC Group will
waive, any rights, remedies, or claims GEC or any other member of
the GEC Group may have against any Group Company or any director of
a Group Company or any Employee with respect to claims arising out
of any information, opinion or advice supplied or given (or omitted
to be supplied or given) to GEC in connection with the proposed
entering into of this Agreement and the sale of such Group Company,
other than in the case of fraud, wilful misstatement or wilful
omission;
(B) GEC agrees that any such rights, remedy or claim shall not
constitute a defence to any claim by the Purchaser under or in
relation to this Agreement (including the Warranties) or the Tax
Covenant.
<PAGE>
3
5.4 GEC undertakes that, except to the extent permitted by the licences in
clause 6.4 and clause 6.6, following Completion no member of the GEC
Group will use any confidential information (including, to the extent
they are confidential, trade secrets, know-how or financial or trading
information) proprietary to a Group Company in order to compete with such
Group Company, and GEC shall not and shall procure that no member of the
GEC Group nor any officer or employee of GEC or any member of the GEC
Group shall make use of (to the extent such use would be reasonably
likely to harm or damage the business of any Group Company) or divulge to
any third party (other than GEC's professional advisers in which case GEC
will use its reasonable endeavours to procure that such advisers keep
such information confidential on terms equivalent to this Clause) any
confidential information proprietary to any Group Company and save only:
(A) insofar as the same has become public knowledge otherwise than,
directly or indirectly, through GEC's breach of this Clause 5.4 or
the failure of the officers, employees or professional advisers
referred to above to keep the same confidential; or
(B) to the extent required by law or by any supervisory body or
regulatory body; or
(C) to the extent GEC reasonably considers necessary solely for the
purposes of defending any claim by the Purchaser or any Group
Company against GEC or another member of the GEC Group; or
(D) to the extent GEC or any member of the GEC Group has a right (except
any right which it has obtained solely by reason of the GEC Group's
ownership of Group Companies) to make use of or divulge any
confidential information relating to the Group Companies on any
other account including, without limitation, in its capacity as a
customer of or distributor for the Group Companies.
(E)
5.5 GEC undertakes to procure that (except as provided in Clause 5.6 or as
otherwise agreed in writing with the Purchaser) no members of the GEC
Group will either solely or jointly with any other person, and whether
directly or indirectly:
(A) within the Territory for a period of 2 years from Completion carry
on or as an owner be interested in any business, enterprise or
venture materially competing with any of the businesses carried on
by the Group Companies at the date of Completion ("the Businesses")
which fall within the definition of the Restricted Business;
(B) for a period of 2 years from Completion solicit, canvass or entice
away (either on its own account or as the agent of any other person)
the custom of any
<PAGE>
4
person, firm or company who was at any time during the period of two
years immediately preceding Completion a client or customer of a
Group Company for the purpose of offering to such client or customer
goods or services similar to or materially competing with those of a
Group Company in a Restricted Business;
(C) for a period of 2 years from Completion solicit, canvass or entice
away any Employee whose basic salary at the date of Completion is in
excess of L30,000 and who is employed in a sales, technical,
engineering or managerial capacity to leave the service or
employment of any Group Company or any other member of the IFR Group
whether or not such person would commit a breach of contract by
reason of leaving service, provided that the foregoing restriction
shall not apply to an Employee who responds to a public
advertisement.
5.6 Nothing in this Agreement (but without prejudice to the express
provisions of clauses 6.4 and 6.6) shall prevent any member of the GEC
Group (or require GEC to prevent any member of the GEC Group) from:
(A) carrying on any business carried on by the relevant member of the
GEC Group at the date of this Agreement, or from developing or
extending such business in such manner as it sees fit including, for
such purpose, soliciting, canvassing or enticing away the custom of
any person, firm or company provided that the primary purpose of
such development or extension is not to enable the GEC Group to
re-enter the Restricted Business;
(B) establishing and carrying on any business consisting in whole or in
part of the distribution of products for any third party, whether or
not such products compete with any product offered by any Group
Company, but so that this paragraph shall not operate to release any
member of the GEC Group from any obligations it may have to any
Group Company under any other agreement (including, without
limitation, any exclusivity provisions under distribution
agreements);
(C) (i) acquiring any group, company or other entity or any business or
undertaking (the "Acquired Entity") which carries on or comprises or
includes a Restricted Business which competes with any of the
Businesses operating within the Restricted Business (the "Competing
Business"), provided that the turnover of the Competing Business
has in the last complete financial year of the Acquired Entity prior
to its acquisition by a member of the GEC Group represented less
than 40 per cent. of the turnover of all the businesses carried on
by the Acquired Entity (excluding turnover of businesses of the
Acquired Entity which are excluded from the acquisition by the GEC
Group so far as ascertainable from the last audited accounts of the
Acquired Entity) , or (ii) thereafter from carrying on the
Competing Business, or developing or extending the Competing
Business in such manner as it sees fit provided in each case that
the primary purpose of such acquisition, development or
<PAGE>
5
extension is not to enable the GEC Group to re-enter the
Restricted Business. For the purposes of this paragraph (C), a
group, company, other entity, undertaking or business shall be
deemed to carry on or comprise or include any business which
it owns directly or indirectly through one or more other
companies, entities, undertakings or businesses; or
(D) acquiring any shares listed on a recognised stock exchange not
exceeding 10 per cent of the issued voting share capital of the
relevant company, provided that the primary purpose of such
acquisition is not to enable the GEC Group to re-enter the
Restricted Business.
"Restricted Business" means the manufacture and distribution of microwave
and radio frequency test and measurement equipment and related services
to the communications and printed circuit board industries as carried on
by any Group Company at the date of this agreement, excluding equipment
with self-testing capability and existing competing businesses within the
GEC Group.
5.7 GEC confirms that it is not its intention to procure the termination at
or within 6 months of Completion by GEC Group Companies of the agreements
to which Disclosure Document 17-120 relates with Group Companies solely
by reason of the change of control of the Group Companies.
5.8 Each undertaking contained in Clause 5.5 shall be construed as a separate
undertaking and if one or more of the undertakings contained in such
sub-Clause is held to be against the public interest or unlawful or in
any way an unreasonable restraint of trade the remaining undertakings
shall continue to bind GEC.
5.9 If any undertaking contained in Clause 5.5 would be void as drawn but
would be valid if the period of application were reduced or if some part
of the undertaking were deleted, the undertaking in question shall apply
with such modification as may be necessary to make it valid and
effective.
5.10 GEC hereby grants and shall procure that each member of the GEC Group at
the date hereof grants, with effect from Completion, a non-exclusive,
irrevocable, non-transferable, royalty-free, perpetual worldwide licence
to the Purchaser for the benefit of itself, each member of the IFR Group
and each Group Company to use (which shall include the right to
sub-contract) all Intellectual Property (except for the Names) and any
confidential information or other know-how owned at Completion by any
member of the GEC Group for the purpose for which it was used by any
Group Company prior to the date of Completion and for the purpose of
developing, manufacturing and selling any improvement, modification or
adaptation of products manufactured or in the course of development at
Completion. If the Purchaser, any member of the IFR Group or any Group
Company wishes to extend the benefit of any of the rights granted to it
pursuant to this clause 5.10, then it shall notify the Head of the GEC
Patent Department in writing and GEC will promptly respond to such
request and will not unreasonably refuse and shall procure that each
member of the GEC
<PAGE>
6
Group shall not unreasonably refuse the grant of a licence on
reasonable terms to a third party licensed by a Group Company to
manufacture a product manufactured and sold by any such Group
Company at Completion provided that GEC shall not be obliged to
license or procure that the relevant member of the GEC Group
licenses such third party where the third party intends to
incorporate such product into another product, the sale or supply
of which would or might compete with any business of the GEC Group
at such time and provided further that GEC shall be obliged to
grant or procure the grant of such licence where the third party
manufacturer was licensed by a Group Company in circumstances where
the Group Company did not know and did not have grounds to believe
that the manufacture of the relevant product required a licence of
such rights from a member of the GEC Group.
5.11 To the extent that GEC or any member of the GEC Group is aware that any
registered Intellectual Property is subject to the licence granted
pursuant to clause 5.10, then it shall use its reasonable endeavours not
to allow any such registration to cease by virtue of non-payment of any
renewal fees without first offering to assign the relevant Intellectual
Property to the Purchaser and if the Purchaser requests an assignment GEC
or the relevant member of the GEC Group shall take all reasonable steps
necessary to effect such assignment at the cost of the Purchaser. If
such Intellectual Property is assigned it shall be deemed to be included
in the Intellectual Property licensed to the GEC Group pursuant to clause
6.4.
5.12 GEC and the Purchaser shall use their reasonable endeavours to ensure
that the patent and registered trade mark files relating to the
Intellectual Property owned by the Group Companies (including all
relevant files relating to the prosecution of patent and registered trade
mark applications and any disputes in relation to patents and registered
trade marks and applications therefor) are transferred to the Purchaser
in an orderly manner in the 6 month period following Completion and for
such period, at the written request and expense of the Purchaser, GEC
shall provide the services of the GEC Patent Department consistent with
those services provided immediately prior to Completion. While any such
file is in the possession of GEC, GEC shall, unless otherwise notified in
writing, pay on behalf of the Purchaser any renewal or other official
fees necessary to maintain in force any patent or registered trade mark
or continue the prosecution of any application for patent or trade mark
registration. The Purchaser shall promptly pay all reasonable costs of
GEC in providing such services (including all such fees paid by GEC on
behalf of the Purchaser) which may include assistance with existing
disputes relating to the business of the Group Companies. GEC shall, at
the request of the Purchaser, promptly deliver to the Purchaser to a site
in the UK all relevant files and documents relating to the Intellectual
Property owned by the Group Companies to the extent that such files and
documents are not already in the possession of any of the Group
Companies.
5.13 If either GEC or the Purchaser discovers at any time after Completion
that any Group Company owns any Intellectual Property at the Completion
Date which relates
<PAGE>
7
exclusively to any business carried on by the GEC Group prior to
the Completion Date, it shall immediately notify the other.
Thereafter, at the request and expense of GEC, the Purchaser
undertakes to use its reasonable endeavours to procure the
assignment of any such Intellectual Property to GEC or to a member
of the GEC Group nominated by GEC.
5.14 (A) The Purchaser shall give reasonable prior notice to GEC (with all
relevant details) of any payment which is proposed to be made by a
Group Company to any relevant executive of the Group Companies in
satisfaction in whole or in part of any sum due to such executive
by way of retention bonus or enhancement to the Management Bonus
Scheme as detailed in Disclosure Document 17-81. If GEC is
satisfied that the proposed payment is in accordance with such
arrangements, it will forthwith reimburse the relevant Group
Company the amount of the payment upon receipt of confirmation
from the Purchaser that the payment has been made, provided that
GEC's obligations under this sub-clause 5.14(A) shall not apply
with respect to any payment of any management bonus payable to
executives of Group Companies in the ordinary course.
(B) GEC will pay Peter Smith's management bonus which falls due
shortly after Completion. On Marconi (UK) being notified by GEC
that payment has been made the Purchaser will procure that Marconi
(UK) promptly reimburses such amount (excluding any retention
element or enhancement attributable to the sale of the Shares) to
GEC.
5.15 GEC undertakes that if:-
(i) the Purchaser shall have first specifically identified to GEC
those matters which it wishes to examine by reference to the Books
and Records of the GEC Group for the purposes of managing the
business of the Group; and
(ii) the GEC Group has Books and Records which can reasonably be
regarded as of assistance to the Purchaser in connection with the
matters specified by it pursuant to paragraph (i) above; and
(iii) the matters specified by the Purchaser pursuant to paragraph (i)
above may reasonably be regarded as proper matters for
investigation for the purposes of managing the business of the
Group and have no connection with any dispute between any member
of the GEC Group and any member of the IFR Group, whether such
dispute has already commenced or is within the contemplation of
the Purchaser (in which cases the normal rules of discovery will
apply)
GEC will itself, and will procure that each member of the GEC Group will,
during the period of six years from the date of this Agreement provide to
the Purchaser and any person authorised by the Purchaser such access to
those Books and Records of the GEC Group as may reasonably be regarded as
of assistance to the Purchaser in
<PAGE>
8
connection with the matters specified by it pursuant to paragraph
(i) above. Access to the Books and Records of the GEC Group
pursuant to this clause shall be given during normal business
hours, upon reasonable notice having been given and subject to the
giving of such undertakings as to confidentiality as GEC or the
relevant GEC Group member may reasonably require. GEC will
instruct the directors and employees or any relevant member of the
GEC Group promptly to provide to the Purchaser or any person
authorised by the Purchaser any further information or explanation
(to the extent known to such directors or employees) which the
Purchaser or any such person may reasonably request in connection
with any relevant matter.
5.16 The Purchaser acknowledges that the dispute over the termination by
Marconi (UK) of its distribution agreement with Marconi SpA has been
settled by the deduction by Marconi SpA of L95,000 from sums owing by
Marconi SpA to Marconi (UK) and by Marconi (UK)'s agreement to acquire
stock from Marconi SpA at prices which may be in excess of net book value
up to an aggregate excess amount of L15,000. GEC undertakes to pay the
Purchaser by way of adjustment to the Aggregate Purchase Price (i) the
amount of L95,000, within 3 working days of Completion, and (ii) promptly
upon its being given all relevant details, the amount of any excess
payment over net realisable value to Marconi SpA for stock up to an
aggregate amount of L15,000. The Purchaser will procure that Marconi
(UK) acknowledges that it will not take any action to recover from
Marconi SpA the amount so deducted.
5.17 The Purchaser undertakes to procure that Marconi (UK) keeps GEC fully
informed of all notices or other communications (written or oral)
received by Marconi (UK) from the Scottish Office in connection with any
possible requirement for the grant referred to in the disclosure in the
Disclosure Letter under Warranty 10 to be repaid and that Marconi (UK)
permits GEC the conduct on its behalf of all discussions and
correspondence with the Scottish Office which may arise in connection
with any such possible requirement. In the event that Marconi (UK) is
required to repay the whole or any part of the amount of such grant
received by it, GEC undertakes to the Purchaser to reimburse Marconi (UK)
forthwith the amount of any repayment of such grant made by Marconi (UK)
to the Scottish Office.
6. PURCHASER'S AND GUARANTOR'S WARRANTIES AND UNDERTAKINGS
6.1 Each of the Purchaser and the Guarantor warrants to GEC that in respect
of itself:-
(A) it has the requisite power and authority to enter into and perform
this Agreement and all or any other documents to be executed by it
and delivered at Completion in accordance with this Agreement;
(B) this Agreement constitutes and all or any other documents executed
by it which are to be delivered at Completion will, when executed,
constitute obligations binding on it; and
<PAGE>
9
(C) the execution and delivery of, and the performance by it of its
obligations under this Agreement will (or with the giving of notice
or lapse of time or both would) not:-
(i) result in a breach of a statutory provision or regulation
applicable to it of any provision of its memorandum or
articles of association or other constitutional documents;
(ii) result in a breach of any order, judgment or decree of any
court or governmental agency to which it or any member of the
Purchaser's Group is a party or by which it or any member of
the Purchaser's Group is bound; or
(iii) require the consent of its shareholders;
and the Guarantor further warrants to GEC that it owns, directly or
indirectly, all the issued share capital of the Purchaser and is the
"ultimate parent entity" of the Purchaser within the meaning of Rule
801.1 promulgated under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
6.2 The Purchaser undertakes to use its reasonable endeavours to procure
that, as soon as reasonably practicable following Completion or (in the
case of any GEC Security of which GEC has not informed the Purchaser in
writing on or prior to the date hereof) as soon as reasonably practicable
after the Purchaser becomes aware of such GEC Security, GEC and each
other member of the GEC Group is released from the GEC Securities and
undertakes to hold GEC, for itself and as trustee for its subsidiaries
and the relevant members of the GEC Group indemnified and to keep it and
them indemnified from and against all actions, claims, proceedings, loss,
damage, payments, costs or expenses incurred by GEC or any member of the
GEC Group in relation to or arising out of any such GEC Securities.
6.3 (A) The Purchaser acknowledges that the Names are and shall remain the
property of the GEC Group and that nothing in this Agreement shall
transfer or operate as an agreement to transfer any right, title or
interest in any of the Names to the Purchaser.
(B) The Purchaser will comply with, and procure the compliance by all
the Group Companies with, the provisions of Schedule 7. Subject as
provided in Schedule 7, the Purchaser undertakes that it shall not
and shall procure that no Group Company nor any other member of the
Purchaser's Group shall at any time after the period of nine months
commencing at Completion make any use of any trade marks or business
or corporate names consisting of or incorporating any of the Names
and/or any trade mark or business or corporate name confusingly
similar thereto in relation to any goods or services. The Purchaser
shall indemnify and hold harmless GEC and all members of the GEC
Group for any loss or damage of whatsoever nature
<PAGE>
10
which arises out of the use by the Group Companies of any of the
Names after Completion.
6.4 Subject to the provisions of clause 5.5, the Purchaser hereby grants and
shall procure that each of the Companies and their subsidiaries or
subsidiary undertakings at the date hereof (the "Present Group") grants,
with effect from Completion, a non-exclusive, irrevocable,
non-transferable, royalty-free, perpetual worldwide licence to GEC for
the benefit of itself and each GEC Group Company to use (which shall
include the right to sub-contract) for the purpose of the business of
each GEC Group Company at the date hereof all Intellectual Property and
any confidential information or other know-how owned at Completion by any
of the Group Companies for the purpose for which it was used by any GEC
Group Company prior to the date of Completion and for the purpose of
developing, manufacturing and selling any improvement, modification or
adaptation of products manufactured or in the course of development at
Completion. If any member of the GEC Group wishes to extend the benefit
of any of the rights granted to it pursuant to this clause 6.4, then it
shall notify the Purchaser in writing and the Purchaser will promptly
respond to such request and will not unreasonably refuse and shall
procure that the Present Group or such other member of the IFR Group that
owns such Intellectual Property shall not unreasonably refuse the grant
of a licence on reasonable terms in respect of any such extension to a
third party licensed by a member of the GEC Group to manufacture a
product manufactured and sold by any member of the GEC Group at
Completion provided that the Purchaser shall not be obliged to license or
procure a licence to such third party where the third party intends to
incorporate such product into another product, the sale or supply of
which would or might compete with any business of the IFR Group at such
time and provided further that the Purchaser shall be obliged to grant or
procure the grant of such licence where the third party manufacturer was
licensed by a member of the GEC Group in circumstances where the member
of the GEC Group did not know and did not have grounds to believe that
the manufacture of the relevant product required a licence of rights
owned at Completion by a Group Company.
6.5 To the extent that the Purchaser or any Group Company is aware that any
registered Intellectual Property is subject to the licence granted
pursuant to clause 6.4 then it shall use its reasonable endeavours not to
allow any such registration to cease by virtue of non-payment of renewal
fees without first offering to assign the relevant Intellectual Property
to GEC and if GEC requests an assignment the Purchaser or any relevant
Group Company shall take all reasonable steps necessary to effect such
assignment at the cost of GEC. If such Intellectual Property is
assigned, it shall be deemed to be included in the Intellectual Property
licensed to the Purchaser, any member of the IFR Group or to any of the
Group Companies pursuant to clause 5.10.
6.6 Subject to clause 5.5, the Purchaser hereby grants and shall procure that
each member of the Present Group grants, with effect from Completion, a
non-exclusive, irrevocable, royalty-free, perpetual licence to GEC for
the benefit of itself and any other member of the GEC Group at the date
hereof to use all rights under any patent
<PAGE>
11
or patent application (or any patent derived therefrom) owned by any
member of the Group at Completion for the purpose of carrying on any
business which does not compete with the businesses of the Group, it
being understood that any use of such rights for the purpose of carrying
on business which at the time the use commences does not compete with
the business of the Group may continue notwithstanding that the business
of the Group changes such that the business carried on competes with
such business. Any licence granted shall not include the right to
sub-license but shall be transferable to a purchaser (whether by shares
or assets) of all or a substantial part of any business using any or all
of such patent rights to the extent that such rights are used at such
time.
6.7 If either GEC or the Purchaser discovers at any time after Completion
that any GEC Group Company owns any Intellectual Property at the
Completion Date which relates exclusively to any business carried on by
the Group prior to the Completion Date, it shall immediately notify the
other. Thereafter, at the request of the Purchaser, GEC undertakes, at
its expense, to use its reasonable endeavours to procure the assignment
of any such Intellectual Property to the member of the Purchaser's Group
nominated by the Purchaser. Nothing in this clause 6.7 shall be deemed
to deprive the Purchaser of any claim it may have against GEC for breach
of any Warranties concerning Intellectual Property.
6.8 The Purchaser further warrants to GEC as follows:
(A) The Purchaser is purchasing the Shares partly for the Purchaser's
own account and partly for the account of another member of the IFR
Group for investment purposes only and not with a view to, or for
sale in connection with, a distribution of the Shares within the
meaning of the Securities Act. Neither the Purchaser nor any other
member of the IFR Group has any present intention of selling or
otherwise disposing of all or any portion of the Shares and no one
other than the Purchaser or another member of the IFR Group has or
will have following Completion, any beneficial ownership of any of
the Shares;
(B) The Purchaser is a sophisticated investor having such knowledge and
experience that it is capable of protecting its own interests in
connection with purchase of the Shares.
(C) At no time was the Purchaser presented with or solicited by any
publicly issued or circulated newspaper, mail, radio, television or
other form of general advertising or solicitation in connection with
the offer, sale and purchase of the Shares;
(D) The Purchaser understands that the Shares have not been registered
under the Securities Act or qualified under applicable state
securities laws or exemptions from such registration and
qualification requirements are available and may
<PAGE>
12
not be offered, sold or otherwise disposed of in violation of the
registration requirements of the Securities Act or any state
securities law.
6.9 The Purchaser undertakes itself to, and to procure that each Group
Company shall, provide to GEC and any person authorised by GEC for six
years from Completion such access during normal business hours to the
premises and all the Books and Records and title deeds of the Group as
GEC or any person authorised by GEC may reasonably require in connection
with the conduct of the business of the GEC Group or the previous
ownership of the Group by the GEC Group upon reasonable notice and
subject to giving such undertakings as to confidentiality as the
Purchaser or the relevant Group Company may reasonably require and the
Purchaser or the relevant Group Company will instruct its directors and
employees to give promptly all information and explanations to GEC or any
person authorised by GEC as they may reasonably request in connection
therewith.
6.10 As indicated in Clause 5.3, the Purchaser acknowledges directors and
Employees of Group Companies have been involved in matters relating to
GEC's proposals for the sale of the Shares. The Purchaser acknowledges
no charges in respect of any time spent by such directors or Employees
shall be made to GEC or any other member of the GEC Group. GEC
acknowledges that it will be responsible for the payment of any fees,
costs and/or expenses due to any professional advisers in relation to
GEC's proposals for the sale of the Shares and to the extent that any
such fees, costs and/or expenses have been invoiced to a Group Company,
GEC will pay the same or (if they have already been paid) forthwith
reimburse the relevant Group Company.
6.11 The Purchaser acknowledges that it is aware that the payment of the
Pre-Sale Dividend and related capital reorganisation of Marconi (UK),
details of which are set out in Schedule 12, has occurred and undertakes
that it will not and will procure that no member of the Group or the IFR
Group shall take any steps to challenge the validity or enforceability
thereof. If any successful challenge is made to the Pre-Sale Dividend or
related capital reorganisation of Marconi (UK), such that the whole or
any part of the Pre-Sale Dividend or other amounts specified in Schedule
12 has to be repaid to Marconi (UK), the Purchaser will pay to GEC, as
additional consideration for the sale of the Shares, a sum equal to that
part of the Pre-Sale Dividend or other specified payment so repaid less
(i) any reasonable costs and expenses (including taxes) of the Purchaser
and Marconi (UK) incurred as a result of or in connection with such a
challenge or repayment and (ii) an amount equal to the amount of any
claim for breach of any of the Warranties contained in paragraph 9.2 of
schedule 3 which has either been accepted as a liability by GEC or which
has been determined by a court of competent jurisdiction to be payable by
GEC or which the Purchaser is bona fide able to show reasonable grounds
for its belief that GEC is liable for the amount of such claim and has
been advised by leading counsel of at least 10 years call that it would
have reasonable prospects of success were it to pursue such claim in
legal proceedings provided that if GEC is subsequently found not to be
liable for such claim, the Purchaser shall immediately refund to GEC the
amount deducted, together
<PAGE>
13
with interest from the date on which the payment would have been due had
the deduction not been made.
6.12 The Purchaser hereby confirms and undertakes to GEC that it has prior to
Completion made an offer to Peter Smith to employ him as from Completion
on overall terms (excluding pension terms) economically the same as or
better than those on which he was immediately prior thereto employed.
6.13 The Purchaser acknowledges that GEC has no liability under the Tax
Covenant or otherwise in respect of any tax which may fall to be payable
in respect of payments received from Rohde & Schwarz since the Accounts
Date.
7. PURCHASER'S REMEDIES AND GEC'S LIMITATIONS ON LIABILITY
7.1 The Purchaser's right to claim that a Warranty has been breached shall be
limited as set out in clause 7.2 and in Schedule 4, and no liability
shall attach to GEC in respect of claims under the Warranties or the Tax
Covenant, as the case may be, if and to the extent that such limitations
apply.
7.2 The Purchaser shall not be entitled to claim that any fact causes any of
the Warranties to be breached if it was fairly disclosed or deemed to be
disclosed in the Disclosure Letter or on the face of any document
delivered with or referred to in the Disclosure Letter. Notwithstanding
the foregoing GEC acknowledges that the Purchaser's right to claim under
the Tax Covenant or the Environmental Undertaking shall not be affected
or restricted by any disclosure in the Disclosure Letter or documents
delivered with or referred to in it.
7.3 If, following Completion, the Purchaser becomes aware that there has been
any material breach of the Warranties or any other term of this
Agreement, the Purchaser shall not be entitled to treat this Agreement as
terminated but shall, in accordance with the provisions of paragraph 5 of
Schedule 4, be entitled to claim damages under this Agreement.
7.4 Each of the parties acknowledges that the restrictions contained in
clauses 5.4 and 17 shall continue to apply after the completion of the
sale and purchase of the Shares under this Agreement without limit in
time.
8. GUARANTEE
8.1 In consideration of GEC agreeing to sell the Shares on the terms set out
in this Agreement, the Guarantor hereby unconditionally and irrevocably
guarantees to GEC as a primary obligor and notwithstanding any want of
authority, invalidity or other defect the due and punctual performance
and observance by the Purchaser of all of its obligations, commitments
and undertakings under or pursuant to this Agreement or any other
document referred to in it and agrees to indemnify GEC in respect of any
breach by the Purchaser of any of its obligations, commitments and
undertakings
<PAGE>
14
under or pursuant to this Agreement or any other document referred to
in it. The liability of the Guarantor under this Agreement or any other
document referred to in it shall not be released or diminished by any
variation of the terms of this Agreement or any other document referred
to in it (whether or not agreed by the Guarantor), any forbearance,
neglect or delay in seeking performance of the obligations hereby imposed
or any granting of time for such performance.
8.2 If and whenever the Purchaser defaults for any reason whatsoever in the
performance of any obligation, commitment or undertaking undertaken or
expressed to be undertaken under or pursuant to this Agreement or any
other document referred to in it, the Guarantor shall forthwith upon
demand unconditionally perform (or procure performance of) and satisfy
(or procure satisfaction of) the obligation, commitment or undertaking in
regard to which such default has been made in the manner prescribed by
this Agreement or any other document referred to in it and so that the
same benefits shall be conferred on GEC as would have been received if
such obligation, commitment or undertaking had been duly performed and
satisfied by the Purchaser.
8.3 This guarantee is to be a continuing guarantee and accordingly is to
remain in force until all the obligations of the Purchaser shall have
been performed or satisfied regardless of the legality, validity or
enforceability of any provisions of this Agreement and notwithstanding
the winding-up, liquidation, dissolution or other incapacity of the
Purchaser or any change in the status, control or ownership of the
Purchaser. This guarantee is in addition to, without limiting and not in
substitution for, any rights or security which GEC may now or after the
date of this Agreement have or hold for the performance and observance of
the obligations, commitments and undertakings of the Purchaser under or
in connection with this Agreement or any other document referred to in
it.
8.4 As a separate and independent stipulation, the Guarantor agrees that any
obligation, commitment or undertaking expressed to be undertaken by the
Purchaser (including, without limitation, any moneys expressed to be
payable under this Agreement) which may not be enforceable against or
recoverable from the Purchaser by reason of any legal limitation,
disability or incapacity on or of the Purchaser or any fact or
circumstance (other than any limitation imposed by this Agreement) shall
nevertheless be enforceable against and recoverable from the Guarantor as
though the same had been incurred by the Guarantor and the Guarantor were
the sole or principal obligor in respect thereof and shall be performed
or paid by the Guarantor on demand.
8.5 If the Guarantor shall at any time after the date of this Agreement cease
to be the ultimate holding company of the Purchaser as a result of a
reorganisation of the IFR Group, GEC may require that the Guarantor and
the Purchaser procure such company as has become the ultimate holding
company of the Purchaser to assume (subject to the satisfaction of such
conditions precedent as GEC may reasonably require) all the liabilities
of the Guarantor hereunder and to enter into such documentation as GEC
<PAGE>
15
may reasonably require in this connection. The Guarantor and the
Purchaser jointly and severally undertake to GEC to provide all such
co-operation and take all such steps as GEC may reasonably request for
the purposes of giving effect to this clause.
9. PATENT MATTERS
In this clause:-
"Cross Licence" means an agreement which involves (a)
the licensing by GEC of all or a
substantial part of the patent rights
of the GEC Group in a field or relating
to a specific period of time to another
company or group ("the other party");
and (b) the licensing by the other
party of all or a substantial part of
its patent rights in a field or
relating to a specific period of time
to the GEC Group
"Deed of Assignment" means the deed dated 5th February, 1998
in which Marconi (UK) agreed to assign
certain rights to GEC;
"FN and FM Matters" means the matters relating to the
alleged infringement by and possible
licensing of the FN and FM Patents to
Hewlett Packard disclosed in paragraph
18.5(K) of the Disclosure Letter (and
associated Disclosure Documents)
"Hewlett Packard" means Hewlett Packard Company and any
of its subsidiaries, affiliates or
associated companies
"HP Claims" means any claims made by Hewlett
Packard relating to Hewlett Packard
patents identified in paragraphs
18.4(F), (G), (H), (I), (K), (L) and
(O) of the Disclosure Letter (and
associated Disclosure Documents) or
which:
(i) relate to a patent subsisting at
Completion that covers products
sold or processes used by a Group
Company prior to Completion; and
(ii) are initiated or brought for the
first time within twelve months
of the later of
<PAGE>
16
Completion and the date of issue
of any proceedings against Hewlett
Packard alleging infringement of
any of the FN or FM patents
"Infringer" shall have the meaning given to it in
clause 9.10
"Infringer Claim" means any claims made against any
member of the IFR Group or a Group
Company by an Infringer which:
(i) relate to a patent subsisting at
Completion that covers products
sold or processes used by a Group
Company prior to Completion; and
(ii) are initiated or brought for the
first time after GEC has taken
conduct or proceedings in
accordance with clause 9.10 and
communicated with an Infringer in
relation to the FN and FM Patents
"MI Field" means testing and measuring equipment
and/or systems for calibrating, testing
or monitoring the output and
performance of electrical, electronic
or telecommunications products or
components of the same
"Net Receipts" means all sums paid by an Infringer or
existing licensee after the date hereof
(excluding, for the avoidance of doubt,
Hewlett Packard) relating to the
enforcement or licensing of the FN and
FM Patents whether by way of damages,
account of profits, up front payment or
periodic licence fees or royalty,
contribution towards costs, expenses or
otherwise less all reasonable costs
incurred after Completion and paid by
the person with conduct of the
negotiations or litigation against the
Infringer to external lawyers, patent
agents (internal or external),
accountants or experts directly
attributable to the enforcement or
licensing of such rights.
<PAGE>
17
HEWLETT PACKARD
9.1 GEC hereby indemnifies and shall keep indemnified the Purchaser and any
member of the IFR Group and any of the Group Companies against all costs,
claims, losses, damages arising out of any of the HP Claims, subject to
the provisions of clauses 9.2 to 9.8 and without limitation compliance by
the Purchaser, the IFR Group and the Group Companies of the undertakings
and obligations set out in clause 9.3 and 9.5.
9.2 Subject to clause 9.7, GEC shall have sole conduct of the HP Claims, but
shall keep the Purchaser regularly informed of all substantive matters
relating to the HP Claims.
9.3 The Purchaser undertakes that it shall not, and shall procure that the
Group Companies do not, directly or indirectly communicate with Hewlett
Packard in relation to the HP Claims or FN and FM Matters and undertakes
not to grant a licence to Hewlett Packard under the FN and FM Patents
without the consent of GEC.
9.4 The Purchaser shall at the cost of GEC use its best endeavours to procure
that GEC (or such other company within the GEC Group nominated by GEC) is
granted all rights and given all consents necessary to enforce the FN and
FM Patents against Hewlett Packard in the name of the registered
proprietor of such patents. Nothing in this clause 9.4 shall oblige the
Purchaser to assign or procure the assignment of any of the FN or FM
Patents to GEC or any member of the GEC Group.
9.5 The Purchaser shall procure that GEC is provided with all reasonable
assistance from relevant personnel within the Group Companies in relation
to the enforcement of the FN and FM Patents against or licensing of the
FN and FM Patents to Hewlett Packard or the defence or settlement of the
HP Claims consistent with the assistance provided to GEC Patent
Department prior to Completion. GEC shall pay all reasonable costs
associated with the provision of such assistance.
9.6 Subject to clause 9.7, the Purchaser shall or shall procure that the
proprietor of the FN and FM Patents shall, at the request and cost of
GEC, either grant a licence to Hewlett Packard under the FN and FM
Patents or grant to GEC the right to grant Hewlett Packard a sub-licence
under the FN and FM Patents.
9.7 GEC shall not and shall procure that no member of the GEC Group shall
settle any dispute with Hewlett Packard relating to the alleged
infringement of the FN and FM Patents unless (i) it uses its reasonable
endeavours to secure for the benefit of the businesses of the Group
Companies carried on at Completion in the MI Field a licence under any
patent that is the subject of an HP Claim at the date of any settlement;
or (ii) where the proposed settlement is a Cross Licence, GEC shall
procure that the licence granted by Hewlett Packard includes a licence
for the benefit of the businesses of the Group Companies carried on at
Completion in the MI Field. If, after having used the reasonable
endeavours referred to in (i) above, GEC proposes to conclude a
settlement with Hewlett Packard that does not involve the licence
contemplated by (i) above, then it shall notify the Purchaser of the
proposed settlement and take
<PAGE>
18
account of all reasonable comments made by it in relation to the
proposed settlement. Nothing in this clause shall affect GEC's right to
require, where it has sole conduct pursuant to clause 9.2, that any
action against Hewlett Packard is pursued to a trial or other formal
determination by a court of competent jurisdiction.
9.8 GEC shall be entitled to all sums paid by Hewlett Packard which relate to
the enforcement or licensing of the FN and FM Patents after the deduction
of all reasonable costs incurred by any of the Group Companies and not
reimbursed pursuant to clause 9.5 whether paid by way of damages, account
of profits, up-front payment or periodic licence fees or royalty,
contribution towards costs, expenses or otherwise and whether such sums
are paid to GEC or to any of the Group Companies. Where any such sum is
payable to any of the Group Companies by Hewlett Packard the Purchaser
shall procure that (at GEC's option), all necessary steps are taken to
ensure that such sums are paid direct to GEC or that such sums are paid
over to GEC immediately after receipt and after deduction of the costs as
aforesaid. GEC's entitlement under this clause 9.8 to sums paid by
Hewlett Packard arises only to the extent that GEC does not have an
existing right to the sums in question by virtue of the Deed of
Assignment.
OTHER FN/FM CLAIMS
9.9 The Purchaser shall use its reasonable endeavours to prevent any third
party other than Hewlett Packard infringing or making unauthorised use
(or continuing to infringe or make unauthorised use) of the FN and FM
Patents, including the investigation of alleged infringers notified to
the Purchaser by GEC.
9.10 If within six months of being notified by GEC the Purchaser does not
commence or procure the commencement of proceedings against an alleged
infringer of the FN and FM Patents in circumstances where GEC has
notified the Purchaser that it has reasonable grounds for believing that
the FN and FM Patents are being infringed, then GEC shall have the right
to commence proceedings against such alleged infringer (and if necessary
to do so in the name of the Purchaser or the proprietor of the FN and FM
Patents at the relevant time). If GEC notifies the Purchaser that it
intends to pursue such alleged infringer (the "Infringer") then subject
to clause 9.13, GEC shall have the sole conduct of such proceedings, but
shall keep the Purchaser regularly informed of all substantive matters
relating to them. The Purchaser shall at GEC's cost use its best
endeavours to procure that GEC (or such other company within the GEC
Group nominated by GEC) is granted all rights and given all consents
necessary to enforce the FN and FM Patents in the name of the registered
proprietor of such patents. Nothing in this clause 9.10 shall oblige the
Purchaser to assign or procure the assignment of any of the FN or FM
Patents to GEC or any member of the GEC Group. After GEC has assumed
conduct of any proceedings, the Purchaser shall not and shall procure
that Group Companies do not directly or indirectly communicate with the
Infringer concerning the FN and FM Patents.
<PAGE>
19
9.11 The Purchaser shall procure that GEC is provided with all reasonable
assistance from relevant personnel within Group Companies in relation to
the enforcement of the FN or FM Patents against or the licensing of the
FN or FM Patents to the Infringer consistent with the assistance provided
to the GEC Patent Department in similar circumstances prior to
Completion. GEC shall pay all reasonable costs associated with the
provision of such assistance.
9.12 Subject to clause 9.13, the Purchaser shall, at the request and cost of
GEC, either grant a licence to the Infringer under the FN and FM Patents
or grant to GEC the right to grant the Infringer a sub-licence under the
FN and FM Patents.
9.13 GEC shall not and shall procure that no member of the GEC Group shall
settle any dispute with an Infringer relating to the alleged infringement
of the FN and FM Patents unless (i) it uses its reasonable endeavours to
secure for the benefit of the businesses of the Group Companies carried
on at Completion in the MI Field a licence under any patent that is the
subject of an Infringer Claim at the date of any settlement; or (ii)
where the proposed settlement is a Cross Licence, GEC shall procure that
the licence granted by an Infringer includes a licence for the benefit of
the businesses of the Group Companies carried on at Completion in the MI
Field. If, after having used the reasonable endeavours referred to in
(i) above, GEC proposes to conclude a settlement with the Infringer that
does not involve the licence contemplated by (i) above, then it shall
notify the Purchaser of the proposed settlement and take account of all
reasonable comments made by it in relation to the proposed settlement.
Nothing in this clause shall affect GEC's right to require, where it has
conduct pursuant to clause 9.10, that any action against an Infringer is
pursued to a trial or other formal determination by a court of competent
jurisdiction.
9.14 GEC and the Purchaser shall each be entitled to 50 per cent. of Net
Receipts, whether the Infringer is pursued by the Purchaser or by GEC.
It is acknowledged that in the event that any proceedings taken against
an Infringer are unsuccessful, the party with conduct of the proceedings
shall not be entitled to claim a contribution for any costs incurred from
the other but such costs shall be deductible by the said party from Net
Receipts received under a settlement made with, or an award of court made
against, any other subsequent Infringer. In the event that an Infringer
pays to any member of the GEC Group or any member of the IFR Group
(including any Group Company) any sum relating to the enforcement or
licensing of the FN or FM Patents, then GEC or the Purchaser (as
appropriate) shall procure that 50 per cent. of the Net Receipts is paid
promptly to the other. GEC's entitlement to Net Receipts under this
clause 9.14 arises only to the extent that it does not have an existing
right to the amounts in question by virtue of the Deed of Assignment.
9.15 GEC shall indemnify the Purchaser and all members of the IFR Group and
the Group Companies against all costs, claims, losses or damages arising
out of any Infringer Claim subject to the provisions of clauses 9.9 to
9.14 and without limitation compliance by the Purchaser, the IFR Group
and the Group Companies with their undertakings and obligations set out
in clauses 9.10 and 9.11.
<PAGE>
20
GENERAL
9.16 The provisions of clauses 9.1 and 9.15 shall take effect subject to
paragraph 1 of Schedule 4 and the following additional paragraphs of
Schedule 4: Paragraph 4: (Conduct of Litigation); Paragraph 5: (No
Liability If Loss Is Otherwise Compensated For); Paragraph 6: (Acts of
Purchaser): except that there shall be no exclusion from the ambit of the
indemnity in relation to the continued manufacture of products or use of
processes after Completion which were carried on prior to Completion;
Paragraph 7: (Allowance, Provision or Reserve in the Accounts); and
Paragraph 11: (No Liability For Contingent Or Non-Quantifiable Claims).
In the event of an inconsistency between Schedule 4 and the provisions of
this clause 9, then the provisions of this clause 9 shall prevail.
9.17 In the event that any provision of this clause 9 is alleged or held to be
invalid, illegal or unenforceable by any Court or competent authority
then the parties shall negotiate in good faith such other agreement as
achieves the equivalent effect and, without limitation, the parties
shall, at the request and cost of GEC, consider (a) assignment of the FN
and FM Patents and/or the right to bring proceedings in relation to such
patents to GEC so that any action against Hewlett Packard and/or any
Infringer may be commenced by GEC; or (b) the grant of such additional
rights under the FN and FM Patents as may be necessary to enable GEC to
litigate in its own name and, in any event, the commencement and conduct
of any litigation shall take account of the structure that will ensure
that Hewlett Packard and/or any Infringer pays damages in respect of all
loss or damage of whatsoever nature suffered by either the GEC Group or
the Group Companies.
9.18 Nothing in this clause 9 shall prevent the Purchaser or any Group Company
assigning the FN and FM Patents (i) to any member of the IFR Group, for
as long as such company remains a member of such group and in the event
that such member of the IFR Group leaves the IFR Group then the Purchaser
shall procure that such member assigns the FN and FM Patents to a member
of the IFR Group; and (ii) to a purchaser of a substantial part of the
business of the Group Companies which uses the FN and FM Patents,
provided that such purchaser (a) agrees to assume the obligations of the
Purchaser under this clause 9; and (b) undertakes promptly to enter into
a direct covenant or contractual arrangement with GEC in terms equivalent
to the provisions of this clause 9. Save as aforesaid, the Purchaser
shall procure that the FN and FM Patents are not assigned to a third
party without first offering for assignment the FN and FM Patents to GEC
on no less favourable terms and in any event the Purchaser shall procure
that any assignee of the FN and FM Patents enters into a direct
contractual arrangement with GEC in terms equivalent to the provisions of
this clause 9. In such circumstances assignment of the FN and FM Patents
to a third party shall not release the Purchaser and Group Companies from
their obligations under clause 9.5 and 9.11 or GEC of its obligations to
the Purchaser or any Group Company under clauses 9.1 and 9.15 provided
that the scope and extent of the indemnities are not extended by such
assignment.
20
<PAGE>
21
9.19 GEC shall indemnify the Purchaser or any member of the IFR Group for any
tax paid by it in relation to sums paid by Hewlett Packard and received
by any member of the GEC Group in relation to any claim relating to any
infringement or alleged infringement of the FN and FM Patent, save to the
extent that the quantum of such tax has been increased as a result or
consequence of an assignment of the FN and FM Patents pursuant to clause
9. 18(i). Where any member of the IFR Group is required to pay tax in
relation to the 50 per cent. of Net Receipts received by any member of
the GEC Group, then: (a) if GEC is not obligated to pay any tax with
respect to its share, then GEC shall reimburse the IFR member for any
such tax; and (b) if GEC is obligated to pay tax with respect to its
share, then GEC and IFR shall negotiate in good faith an equal sharing of
the tax paid by the member of the IFR Group on the GEC 50 per cent. of
Net Receipts.
10. PENSION ARRANGEMENTS
Each of GEC and the Purchaser shall comply with Parts A and B of Schedule
5.
11. REAL PROPERTY AND ENVIRONMENTAL UNDERTAKINGS
Each of GEC and the Purchaser shall comply with Parts A and B of
Schedule 6.
12. REMEDIES AND WAIVERS
12.1 No delay or omission on the part of either party to this Agreement in
exercising any right, power or remedy provided by law or under this
Agreement or any other documents referred to in it shall:-
(A) impair such right, power or remedy; or
(B) operate as a waiver thereof
except in respect of any right, power or remedy exercisable by the
Purchaser under the provisions relating to limitations on liability under
the Warranties as set out in clause 7 and Schedule 4.
12.2 The single or partial exercise of any right, power or remedy provided by
law or under this Agreement shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
12.3 Rights, powers and remedies arising under this Agreement are cumulative
and (subject as provided in clause 7.3 and paragraph 5 of Schedule 4) not
exclusive of any other rights, powers and remedies provided by law.
<PAGE>
22
13. ASSIGNMENT
13.1 This Agreement and the benefits (including the Warranties) and
obligations under it and any part of it shall not be assignable by the
Purchaser except that the Purchaser may, upon giving written notice to
GEC, assign the benefit (but not the burden) of this Agreement (i) by way
of security to a lender to whom security is given over the Shares or (ii)
to a member of the IFR Group, if the terms of any such assignment
provide:-
(A) (in the case of any such assignment under sub-paragraph (ii) above)
that the assignee remains a member of the IFR Group and that before
the assignee ceases to be a member of the IFR Group, the Purchaser
will procure that the benefit of this Agreement is assigned to the
Purchaser or (upon giving further written notice to GEC) to another
company within the IFR Group (any such further assignment to be
subject to the same conditions as above); and
(B) (in the case of any such assignment under sub-paragraph (i) or (ii)
above), that if the liability of GEC shall be increased by reason of
such assignment, the assignee shall be entitled to claim against GEC
only such amount as would equal GEC's liability had no assignment
taken place.
13.2 This Agreement and the benefits and obligations under it and any part of
it shall not be assignable by GEC except that GEC may, upon giving
written notice to the Purchaser assign the benefit (but not the burden)
of this Agreement to a member of the GEC Group provided that:-
(A) any such assignee remains a member of the GEC Group; and
(B) before such assignee ceases to be a member of the GEC Group, GEC
will procure that the benefit of this Agreement is assigned to GEC
or (upon giving further written notice to the Purchaser) to another
company within the GEC Group (any such further assignment to be
subject to the same conditions as above); and
(C) if the liability of the Purchaser shall be increased by reason of
such assignment, the assignee shall be entitled to claim against the
Purchaser only such amount as would equal the Purchaser's liability
had no assignment taken place.
13.3 The Warranties shall continue to have effect for all purposes in relation
to a Group Company notwithstanding that such Group Company has ceased to
be owned by a member of the IFR Group (a "Group Cessation"), provided
that the liability of GEC in respect of any claim under the Warranties
made after a Group Cessation shall not exceed the amount of the liability
(if any) which it would have had in respect of such claim had the claim
been made before a Group Cessation and provided further that
<PAGE>
23
this clause 13.3 shall not impair or affect in any way the restrictions
on assignment under clause 13.1.
14. FURTHER ASSURANCE
14.1 Each of the parties shall from time to time, on being required to do so
by the other, now or at any time in the future, execute or procure the
execution of all such documents in a form satisfactory to the party
concerned as the parties may, in each such case, reasonably consider
necessary for giving full effect to this Agreement and securing to the
Purchaser or GEC (as the case may be) the full benefit of the rights,
powers and remedies conferred upon them in this Agreement.
SEEBECK EFFECT MICROWAVE POWER SENSOR
14.2 GEC confirms that the Intellectual Property which arose directly out of
the funding by Marconi Instruments Limited of the research documented in
Report 16571B (June 1980) and commissioned in subsequent related purchase
orders and which specifically related to the deliverables under these
arrangements are owned by Marconi Instruments Limited. At the request of
the Purchaser, GEC shall procure a confirmatory assignment of such rights
to the Purchaser (or a nominated member of the IFR Group), subject to any
third party rights (if any). Without limiting the provisions of clause
6.4, the Purchaser shall procure the grant of a licence of such
Intellectual Property to GEC for research and development and will not
unreasonably withhold its consent to the extension of such licence on
reasonable terms.
GALLIUM ARSENIDE MONOLITHIC MICROWAVE INTEGRATED CIRCUITS
14.3 GEC Marconi Limited has or is in the process of conducting the following
work funded by MI (and managed by GEC - Marconi Materials Technology
Limited, a GEC Group company): HBT Modulators Report (August 1997), IQ
Modulators Reports (July and August 1997) and study of GaAs MMICs for
Electronic Attenuators (commenced December 1997) (together "the
Projects"). GEC confirms that the Intellectual Property which has been
or will be developed and which directly arises out of the funding by
Marconi Instruments Limited of the Projects and which specifically
relates to deliverables under these arrangements are and will be owned by
Marconi Instruments Limited. At the request of the Purchaser, GEC shall
procure a confirmatory assignment of such present and future rights to
the Purchaser (or a nominated member of the IFR Group), subject to any
third party rights (if any). Without limiting the provisions of clause
6.4, the Purchaser shall procure the grant of a licence of such
Intellectual Property to GEC-Marconi Limited for research and development
and will not unreasonably withhold its consent to the extension of such
licence on reasonable terms. It is agreed that the letter dated 3rd
February 1998 from GEC-Marconi to Marconi Instruments Limited shall have
no effect and is superseded by the provisions of this clause 14.3.
<PAGE>
24
15. ENTIRE AGREEMENT
15.1 This Agreement, the Tax Covenant, the Disclosure Letter and any other
documents referred to in this Agreement constitute the whole and only
agreement between the parties relating to the sale and purchase of the
Shares and, save to the extent expressly set out in this Agreement,
supersede and extinguish any prior drafts, agreements, undertakings,
representations, warranties, promises, assurances and arrangements of any
nature whatsoever, whether or not in writing relating thereto.
15.2 Each party acknowledges that save to the extent expressly set out in this
Agreement, in entering into this Agreement, the Tax Covenant, the
Disclosure Letter and any other documents referred to in this Agreement
on the terms set out therein, it is not relying as against the other
party upon any agreement, undertaking, representation, warranty, promise,
assurance or arrangement made or given by any other party or any other
person, whether or not in writing, at any time prior to the execution of
this Agreement (including without limitation any statement made,
information given or opinion expressed in the Information Memorandum, the
KPMG Report or in any Disclosure Document) or any warranty or condition
implied by statute or otherwise and no representations or warranties are
given by GEC save for the Warranties but so that this clause shall be
without prejudice to any rights which the Purchaser may have against KPMG
in respect of the KPMG Report.
15.3 Neither of the parties shall have any right of action against the other
party to this Agreement arising out of or in connection with any
agreement, undertaking, representation, warranty, promise, assurance or
arrangement referred to in sub-clause 15.1 or 15.2 above (except in the
case of fraud and save to the extent expressly set out in this
Agreement).
15.4 The parties have entered into this Agreement in reliance on the express
terms hereof. In the event of either GEC or the Purchaser proving that
in entering into this Agreement or fulfilling its obligations hereunder
it has acted in reliance on a statement fraudulently made by the other or
would have acted differently but for the fraudulent withholding of
information by the other, the parties acknowledge that the provisions of
this Agreement shall have effect only to the extent consistent with
applicable law and shall not limit in any way the rights of GEC or the
Purchaser (as the case may be) against the other in respect of such
statement or withholding of information.
16. NOTICES
16.1 Any notice or other communication given or made under or in connection
with the matters contemplated by this Agreement shall, unless expressly
stated otherwise, be in writing, other than writing on the screen of a
visual display unit or other similar device which shall not be treated as
writing for the purposes of this clause.
<PAGE>
25
16.2 (A) Any such notice or other communication shall be addressed as
provided in sub-clause 16.3 and sent by personal delivery or by
first class post or airmail (if to an overseas address).
(B) In the absence of evidence of earlier receipt, a notice or other
communication is deemed given or made:
(i) if sent by personal delivery, when left at the address
specified in clause 16.3;
(ii) if sent by first class post, two Business Days after it is
posted; or
(iii) if sent by airmail, five Business Days after it is posted
Provided that if, in accordance with the above provisions, any such
notice or other communication is given or made outside
Working Hours, such notice or other communication shall be deemed to
be given or made at the start of Working Hours on the next Business
Day.
16.3 The relevant addressee and address of each party for the purposes of this
Agreement, subject to sub-clause 16.4, are:-
NAME OF PARTY ADDRESSEE ADDRESS
------------- --------- -------
1. GEC Company Secretary 1 Stanhope Gate,
London, W1A 1EH
from 1st March, 1998
1 Bruton Street,
London
W1
with a copy to N. Boardman/F. Murphy Slaughter and May
35 Basinghall Street
London
EC2V 5DB
2. The Purchaser The Managing Director c/o Marconi Instruments
Longacres House
Norton Green Road
Stevenage
Hertfordshire
SG1 2BA
<PAGE>
26
with a copy to A.N. Drake Boodle Hatfield,
61 Brook Street,
London W1Y 2BL
3. The Guarantor The Chief Executive 10200 West York Street,
Officer Wichita,
Kansas 67215-8999,
U.S.A.
with a copy to H. Sorensen Foulston & Siefkin L.L.P.,
Suite 700,
100 North Broadway,
Wichita,
Kansas 67202,
USA
Provided that failure to send a copy or copies of any notice as indicated
above shall not invalidate a notice duly served on any party to this
Agreement.
16.4 Either party may notify the other party to this Agreement of a change to
its name, relevant addressee or address for the purposes of
sub-clause 16.3 Provided that such notification shall only be effective
on:-
(A) the date specified in the notification as the date on which the
change is to take place; or
(B) if no date is specified or the date specified is less than five
clear Business Days after the date on which notice is given, the
date falling five clear Business Days after notice of any such
change has been given.
17. ANNOUNCEMENTS
17.1 Subject to sub-clause 17.2 any public announcement concerning the sale of
the Shares or any ancillary matter shall be made jointly by the parties
on the date of this Agreement and shall be in such form as shall be
mutually agreed.
17.2 Either party may make a public announcement concerning the sale of the
Shares or any ancillary matter if required by the law of any relevant
jurisdiction or any securities exchange or regulatory or governmental
body to which either party is subject, wherever situated, including
(without limitation) the London Stock Exchange or the Panel, whether or
not the requirement has the force of law, Provided that any such
announcement shall be made only after consultation with the other party
(if practicable).
17.3 The restrictions contained in this clause shall continue to apply after
Completion without limit in time.
<PAGE>
27
18. RESTRICTIVE TRADE PRACTICES ACT 1976
If there is any provision of this Agreement, or of any agreement or
arrangement of which this Agreement forms part, which causes or would
cause this Agreement or that agreement or arrangement to be subject to
registration under the RTPA 1976, then that provision shall not take
effect until the day after particulars of this Agreement or of that
agreement or arrangement (as the case may be) have been furnished to the
Director General of Fair Trading pursuant to section 24 RTPA 1976.
19. COSTS AND EXPENSES
The Purchaser shall bear and pay the cost of all stamp duty, stamp duty
reserve tax and other similar duty, levy or tax and all registration fees
which may result in any jurisdiction from the execution and performance
of this Agreement and the other agreements entered into pursuant hereto
and the transfer of the Shares to the Purchaser and the transactions
contemplated hereby. Save as otherwise stated in this clause or in any
other provision of this Agreement, and subject to the provisions of
clause 6.10 each party shall pay its own costs and expenses in relation
to the negotiations leading up to the sale and transfer of the Shares and
in relation to the preparation, execution and carrying into effect of
this Agreement and all other documents referred to in it and the
transactions contemplated hereby.
20. COUNTERPARTS
20.1 This Agreement may be executed in any number of counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart.
20.2 Each counterpart shall constitute an original of this Agreement, but all
the counterparts shall together constitute but one and the same
instrument.
21. TIME OF ESSENCE
Save as otherwise expressly provided, time is of the essence of each
provision of this Agreement.
22. EFFECT OF COMPLETION
22.1 All provisions of this Agreement shall, so far as they are capable of
being performed or observed, continue in full force and effect
notwithstanding Completion except in respect of those matters then
already performed and Completion shall not constitute a waiver of any of
the Purchaser's rights in relation to this Agreement or the Tax Covenant.
22.2 Without prejudice to sub-clause 22.1 the Warranties shall not be
extinguished by Completion.
<PAGE>
28
23. INVALIDITY
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, then such provision will be deemed to be severed from this
Agreement and if possible replaced by a lawful provision which carries
out, as closely as possible, the intention of the parties under this
Agreement and where permissible that shall not affect or impair:-
(A) the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
(B) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this Agreement.
24. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
English law.
25. JURISDICTION
Each party to this Agreement irrevocably agrees that any Proceedings
against it may be brought in the courts of England. Nothing contained in
this clause shall limit either party's rights to take Proceedings against
the other in any other court of competent jurisdiction, nor shall the
taking of Proceedings in one or more jurisdictions preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or not, to
the extent permitted by the law of such other jurisdiction.
26. AGENT FOR SERVICE
26.1 The Guarantor irrevocably appoints the Purchaser to be its agent for the
service of process in England. It agrees that any Service Document may
be effectively served on it in connection with Proceedings in England and
Wales by service on its agent.
26.2 Any Service Document shall be deemed to have been duly served if marked
for the attention of the Company Secretary at the registered office for
the time being of the Purchaser or such other address within England or
Wales as may be notified and:
(A) left at the specified address; or
(B) sent to the specified address by first class post.
In the case of (A), the Service Document shall be deemed to have been
duly served when it is left. In the case of (B), the Service Document
shall be deemed to have been duly served two clear Business Days after
the date of posting.
<PAGE>
29
26.3 If the agent at any time ceases for any reason to act as such, the
Purchaser shall appoint a replacement agent having an address for service
in England or Wales and shall notify GEC of the name and address of the
replacement agent. Failing such appointment and notification, GEC shall
be entitled by notice to the Purchaser to appoint a replacement agent to
act on the Purchaser's behalf. The provisions of this clause applying to
service on an agent apply equally to service on a replacement agent.
26.4 A copy of any Service Document served on an agent shall be sent by post
to the Purchaser. Failure or delay in so doing shall not prejudice the
effectiveness of service of the Service Document.
26.5 "SERVICE DOCUMENT" means a writ, summons, order, judgment or other
process issued out of the courts of England and Wales document relating
to or in connection with any Proceedings.
AS WITNESS the hands of the duly authorised representatives of the parties the
day and year first above written.
<PAGE>
30
SCHEDULE 1:
DEFINITIONS
(A) In this Agreement, unless otherwise specified the following terms and
expressions shall have the following respective meanings:-
"ACCOUNTS" the financial statements of each Group
Company for the year ended on the Accounts
Date, including a balance sheet and profit
and loss account, copies of which are
included in the Disclosure Documents;
"ACCOUNTS DATE" 31st March, 1997;
"AGGREGATE PURCHASE PRICE" the aggregate of the Dollar Purchase Price
and the Sterling Purchase Price, as
adjusted following Completion pursuant to
paragraph 13 of Schedule 4;
"AGREED FORM" in relation to any document, such document
in a form agreed and initialled for the
purposes of identification by the
Purchaser's Solicitors on behalf of the
Purchaser and GEC's Solicitors on behalf
of GEC;
"ASSURANCE" the transfer of the Longacres Property in
the Agreed Form;
"BOOKS AND RECORDS" has its common meaning and includes,
without limitation, all law notices,
correspondence, orders, inquiries,
drawings, plans, books of account and
other documents and all computer disks or
tapes or other machine legible programs or
other records and all files relating to
any disputes on litigation affecting any
Group Company;
"BUSINESS DAY" a day (other than a Saturday or a Sunday)
on which banks are open for business in
London;
"CGTA" the Capital Gains Tax Act 1979;
"CODE" The City Code on Take-overs and Mergers;
"COMPANIES ACTS" the Companies Act 1985, the Criminal
Justice Act 1993, the Companies
Consolidation (Consequential Provisions)
Act 1985 and the Companies Act 1989;
<PAGE>
31
"COMPANIES" Marconi (UK) and Marconi (US) collectively
(and "Company" means either one of the
Companies individually);
"COMPLETION" completion of the sale and purchase of the
Shares under this Agreement;
"COMPLETION DATE" the date of this Agreement;
"CONTRACTOR'S WARRANTY" the Deed dated 14th February 1995 made
between Shepherd Construction Limited (1)
and GEC (2);
"DANGEROUS SUBSTANCE" any natural or artificial substance
(whether in solid or liquid form or in the
form of a gas or vapour or whether alone
or in combination with any other
substance) capable of causing harm to man
or any other living organism supported by
the Environment, or damaging the
Environment, public health or welfare
including but not limited to any
controlled, special, hazardous, toxic or
dangerous waste;
"DATA ROOM" the data room established at the offices
of GEC's Solicitors in connection with the
transaction effected by this Agreement;
"DISCLOSURE DOCUMENTS" has the meaning given to it in the
Disclosure Letter;
"DISCLOSURE LETTER" the letter dated the date hereof written
by GEC to the Purchaser for the purposes
of clause 7 and delivered to the
Purchaser's Solicitors before the
execution of this Agreement;
"DOLLAR PURCHASE PRICE" U.S. $64,350,000 (sixty four million,
three hundred and fifty thousand U.S.
dollars);
"EMPLOYEE" a person employed by any Group Company;
"ENVIRONMENT" any and all of the following media: air,
(including without limitation, the air
within buildings and the air within other
natural or man-made structures whether
above or below ground); water (including
without limitation, water under or within
land or in drains or sewers and coastal
and inland waters), and land (including
without limitation, land under water and
buildings structures or enclosures above
or below ground); and any living organisms
supported
<PAGE>
32
by any or all of such media;
"ENVIRONMENTAL LAWS" any and all applicable laws in the
relevant jurisdiction (excluding those
laws relating specifically to town
planning matters and to the health and
safety of workers in the work place) and
European Community or European Union
regulations, directives, decisions,
statutes and subordinate legislation which
are applicable to the conduct of the
business of any Group Company and which
have as a purpose or effect the protection
of, and/or the prevention of harm or
damage to, the Environment and/or the
provision of remedies in respect of harm
or damage to the Environment;
"ENVIRONMENTAL UNDERTAKING" the undertaking of GEC set out in
paragraph 1 of Part B of Schedule 6 to
this Agreement;
"ENVIRONMENTAL WARRANTY" any warranty contained in paragraph 21 of
Schedule 3;
"FN AND FM PATENTS" means the Fractional N and/or the DC
Coupled FM Patents brief details of which
are set out in Schedule 8;
"GEC GROUP" GEC and all subsidiaries or subsidiary
undertakings from time to time of GEC
(other than the Group);
"GEC GROUP COMPANY" any member of the GEC Group (and "GEC
Group Companies" means such members
collectively);
"GEC SCHEME" the retirement benefits scheme established
by GEC and known as the "GEC 1972 Plan",
established by a Definitive Trust Deed and
Rules dated 4th March, 1982 (as amended),
details of which schemes are included in
the Disclosure Documents;
"GEC SECURITIES" guarantees, indemnities, performance bonds
or other security or contingent obligation
in the nature of a financial obligation
including, without limitation, letters of
comfort or support which have or may have
been given by GEC or any GEC Group Company
to secure any obligation of any Group
<PAGE>
33
Company;
"GEC'S SOLICITORS" Slaughter and May;
"GROUP" the Companies and all subsidiaries or
subsidiary undertakings from time to time
of each Company, particulars of the
current subsidiaries of the Companies
being given in Part B of Schedule 10;
"GROUP COMPANY" any member of the Group (and "Group
Companies" means such members
collectively);
"GUNNELS WOOD PROPERTIES" the Properties referred to in Part A of
Schedule 11 and registered with Title
Numbers HD296865 and HD165022;
"ICTA 1988" the Income and Corporation Taxes Act 1988;
"IFR GROUP" the Guarantor and all its subsidiaries and
subsidiary undertakings as at Completion
and from time to time thereafter;
"INFORMATION MEMORANDUM" the information memorandum dated October
1997 in connection with the transaction
effected by this Agreement;
"INTELLECTUAL PROPERTY" patents, trade marks and service marks,
rights in designs, (whether or not any of
these is registered and including
applications for registration of any such
thing) semiconductor topography rights,
copyright (including software) and all
rights or forms of protection of a similar
nature or having an equivalent or similar
effect to any of these which may subsist
anywhere in the world;
"KPMG REPORT" the report on the Group prepared by KPMG
in connection with the transaction
effected by this Agreement;
"LONDON STOCK EXCHANGE" the London Stock Exchange Limited;
"LONGACRES PROPERTY" the Property referred to as Longacres
House in Part A of Schedule 11;
"MARCONI (UK)" Marconi Instruments Limited of which
particulars
<PAGE>
34
are given in Part A of Schedule 10;
"MARCONI (US)" Marconi Instruments Inc. of which
particulars are given in Part A of
Schedule 10;
"NAMES" the names GEC, General Electric, General
Electric Company and Marconi;
"PANEL" the Panel on Take-overs and Mergers;
"PERMITS" as at the date of this Agreement any and
all licences, consents, permits,
authorisations or the like, made or issued
pursuant to or under, or required by,
Environmental Laws in relation to the
conduct of the business of each Group
Company as conducted as at such date;
"PRE-SALE DIVIDEND" means the L23,000,000 dividend paid by
Marconi (UK) on 30th January 1998 and
related matters set out in Schedule 12;
"PROCEEDINGS" any proceeding, suit or action arising out
of or in connection with this Agreement;
"PROCESS" any industrial or other process or
activity which has been carried out at the
Properties;
"PROPERTIES" each of the freehold and leasehold
properties described in Schedule 11 (and
"Property" means any one of them);
"PURCHASER'S ATTORNEYS" Foulston & Siefkin LLP;
"PURCHASER'S GROUP" the Purchaser and all subsidiaries or
subsidiary undertakings from time to time
of the Purchaser;
"PURCHASER'S SOLICITORS" Boodle Hatfield;
"REGULATIONS" the Transfer of Undertakings (Protection
of Employment) Regulations 1981;
"REQUISITE CONSENT" the consent of the landlord of the
Longacres Property to the Assurance or to
the underletting of the Longacres Property
to the Purchaser, as the case may be;
<PAGE>
35
"RTPA 1976" the Restrictive Trade Practices Act 1976;
"ST. ALBANS PROPERTY" the property at Longacres, St. Albans,
formerly owned and occupied by Marconi
(UK) and sold to Bryant Homes Southern
Limited under an Agreement for Sale and
Purchase dated 8th August, 1997 between
Marconi Instruments Limited (1) and Bryant
Homes Southern Limited (2), as more
particularly described in that Agreement
(a copy of which is Document 28 in File 36
No. 17 Additional Documents in the
Disclosure Documents);
"SCHEDULES" the schedules to this Agreement;
"SECURITIES ACT" the United States Securities Act of 1933,
as amended;
"SHARES" the issued shares in the Companies
specified in Part A of Schedule 10 (or in
any of the Companies);
"STERLING PURCHASE PRICE" L26,000,000 (twenty six million pounds
sterling);
"TAX COVENANT" the tax covenant referred to, inter alia,
in Schedule 3 and set out in Schedule 9;
"TCGA 1992" the Taxation of Chargeable Gains Act 1992;
"TERRITORY" any country in which a Group Company's
products have been sold or services
supplied, directly or through an agent or
distributor, during the two years prior to
the date of this Agreement;
"TRANSFERORS" GEC-Marconi Limited and Associated
Electrical Industries Holdings Limited (in
respect of the UK Shares) and GEC
Incorporated (in respect of the US
Shares);
"TULRCA" the Trade Union and Labour Relations
Consolidation Act 1992;
"UK GROUP" those members of the Group which are
incorporated in any part of the United
Kingdom;
"UK GROUP COMPANY" any member of the UK Group (and "UK Group
Companies" means such members
collectively);
<PAGE>
36
"UK SHARES" the Shares in Marconi (UK);
"US PURCHASE PRICE" U.S. $6,000,000 (six million U.S.
dollars), being part of the Dollar
Purchase Price;
"US SHARES" the Shares in Marconi (US);
"VAT" the tax imposed by the Sixth Council
Directive of the European Communities;
"VATA" the Value Added Tax Act 1994;
"WARRANTIES" the warranties set out in Schedule 3
(Warranties) given by GEC and "WARRANTY"
shall be construed accordingly;
"WORKING HOURS" 9.30 a.m. to 5.30 p.m. on a Business Day.
(B) In this Agreement, unless otherwise specified:-
(i) references to clauses, sub-clauses, paragraphs, sub-paragraphs,
and Schedules are to clauses, sub-clauses, paragraphs,
sub-paragraphs of, and Schedules to, this Agreement;
(ii) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may
from time to time be, amended, modified or re-enacted except to
the extent that any amendment or modification made after the
date of this Agreement would increase or alter the liability of
any party under this Agreement;
(iii) references to "TAX" or "TAXATION" include, without limitation,
all taxes, levies, duties, imposts, charges and withholdings of
any nature whatsoever, whether of the United Kingdom or
elsewhere, together with all penalties, charges and interest
relating to them;
(iv) references to a "COMPANY" shall be construed so as to include any
company, corporation or other body corporate, wherever and
however incorporated or established;
(v) the terms "SUBSIDIARY" and "SUBSIDIARY UNDERTAKING" shall bear
the same respective meanings as in the Companies Acts;
(vi) references to a "PERSON" shall be construed so as to include any
individual, firm, company, government, state or agency of a state
or any joint venture, association or partnership (whether or not
having separate legal personality);
<PAGE>
37
(vii) the term "RELIEF" shall bear the same meaning as in the Tax
Covenant and the term "PROFIT-SHARING PLAN" shall bear the
meaning given to it in paragraph 7.1 of Part B to Schedule 5;
(viii) a person shall be deemed to be connected with another if that
person is connected with another within the meaning of
section 839 ICTA 1988;
(ix) references to writing shall include any modes of reproducing
words in a legible and non-transitory form;
(x) references to the knowledge or awareness of GEC (or any similar
expression) in relation to the Warranties shall be deemed to
refer to the actual knowledge of GEC, having made enquiries of
P.J. Smith, A.P. Warwick, D.J. Bradney, P.M. Drury, M. McCreary,
S. McQuillan, C. Purchase, C. Thurston, the GEC Group Taxation
Manager, the GEC Group Pensions Manager, GEC Estates Department,
the GEC Environmental Lawyer and the Head of the GEC Patent
Department.
(xi) words or phrases beginning with the introduction of the word
"include" or "including" are to be interpreted without
limitation;
(xii) references to times of the day are to London time;
(xiii) headings to clauses and Schedules are for convenience only and do
not affect the interpretation of this Agreement;
(xiv) the Schedules and any attachments (but not the Tax Covenant) form
part of this Agreement and shall have the same force and effect
as if expressly set out in the body of this Agreement, and any
reference to this Agreement shall include the Schedules;
(xv) references to the masculine gender shall include the feminine and
the neuter (and vice versa) and references to the singular shall
include the plural (and vice versa);
(xvi) references to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status,
court, official or any legal definition, concept or thing shall
in respect of any jurisdiction other than England be deemed to
include what most nearly approximates in that jurisdiction to the
English legal term save where specific reference is made to the
relevant term in such other jurisdiction;
(xvii) references in Clause 5.5(C) and in any of the Warranties to an
amount expressed in pounds sterling shall, in any applicable
case, be construed as referring to the equivalent amount in any
other relevant currency (calculated
<PAGE>
38
by reference to the rate of exchange for such currency prevailing
on the date of this Agreement); and
(xviii) references to any governmental or administrative authority or
agency in connection with any Group Company are references to the
relevant governmental or administrative authority or agency in
the jurisdiction in which the relevant Group Company is
incorporated.
<PAGE>
39
SCHEDULE 2:
COMPLETION ARRANGEMENTS
PART 1
1. GEC'S OBLIGATIONS
1.1 At Completion, GEC shall deliver or procure the delivery to the Purchaser
(or its nominees) of:-
(A) (i) duly executed transfers in respect of the UK Shares in favour
of the Purchaser (or its nominee) and share certificates
representing the UK Shares in the name of the relevant
transferors; and
(ii) at the offices of Sidley & Austin at One First National Plaza,
Chicago, Illinois 60603 the share certificates representing
the US Shares duly endorsed in blank or accompanied by stock
powers duly endorsed in blank in proper form for transfer; and
(iii) the share certificates relating to any shares in the companies
listed in Part B of Schedule 10 which are not registered in
the name of any other Group Company or an Employee together
with duly executed stock transfer forms in respect thereof;
(B) a counterpart original of the Tax Covenant duly executed by GEC;
(C) to the extent not already within the control or possession of Group
Companies, the statutory books or any equivalent or additional
corporate documents, registers or records (which shall be written up
to but not including the Completion Date), the certificate of
incorporation (if any) (and any certificate of incorporation on
change of name) or any equivalent document and the common seal (if
any) of each of the Companies and other members of the Group;
(D) subject to applicable law, letters of resignation from the auditors
of each of the Companies and (where appointed) other members of the
Group containing so far as practicable an acknowledgement that they
have no claim against the relevant member of the Group for
compensation for loss of office or professional fees or (so far as
they are aware at the date of the letters) otherwise and (if
appropriate) a statement under Section 394(1) of the Companies Act
1985;
(E) irrevocable powers of attorney in Agreed Form executed by each of
the holders of the UK Shares in favour of the Purchaser (or its
nominee(s)) to enable the Purchaser (pending registration of the
transfers of the UK Shares)
<PAGE>
40
to exercise all voting and other rights attaching to the UK Shares
and to appoint proxies for this purpose; and
(F) a certified copy of a board or board committee resolution of GEC
approving the entering into by GEC of this Agreement, the Tax
Covenant and the transactions contemplated herein.
1.2 GEC shall procure that a board meeting of each of the Companies be held
at which:-
(A) it shall be resolved that each of the transfers relating to the Shares
[(or the shares referred to in paragraph 1.1A(iii) above)] shall be
approved for registration and (subject only to the transfer being duly
stamped, if so required) that each transferee be registered as the
holder of the Shares respectively in the register of members;
(B) such directors as are not Employees whose resignation as the Purchaser
shall have requested shall resign from their respective positions as
directors of the relevant Group Company, in each case acknowledging
under seal that they have no outstanding claims against the relevant
Group Company in connection with such resignation;
(C) each of the persons nominated by the Purchaser shall be appointed
directors, as the Purchaser shall direct, such appointments to take
effect from Completion; and
(D) the resignation of auditors (if applicable) shall be accepted;
and that minutes of each duly held board meeting, certified as correct by
the secretary or other duly authorised officer of the relevant Company
and the resignations and acknowledgements referred to are delivered to
the Purchaser's Solicitors.
PART 2
2. PURCHASER'S OBLIGATIONS
2.1 The Purchaser shall before 3 p.m. (London time):-
(A) (i) pay to GEC to account number 0015034515 in the name of The
General Electric Company, p.l.c. at Chase Manhattan Bank N.A.,
London (Branch Sort Code: 60-92-42) the Dollar Purchase Price;
and
(ii) pay to GEC to account number 10010006 in the name of The
General Electric Company, p.l.c. at Midland Bank plc, 16 King
Street, Covent Garden, London WC2E 8JF (Branch Sort Code:
40-04-09) the Sterling Purchase Price;
<PAGE>
41
(B) deliver to GEC, duly executed by the Purchaser, a counterpart
original of the Tax Covenant;
(C) deliver to GEC a certified copy of the board resolutions of the
Purchaser approving the entering into by the Purchaser of this
Agreement, the Tax Covenant and the transactions contemplated
hereby; and
(D) deliver to GEC a legal opinion from the Purchaser's Attorneys, legal
advisers to the Guarantor, addressed to GEC in the Agreed Form.
Payment of each of the Dollar Purchase Price and the Sterling Purchase
Price in full in accordance with the foregoing shall discharge all the
Purchaser's obligations with respect to the Aggregate Purchase Price.
3. The Purchaser and GEC shall sign and send a letter in the Agreed Form to
the National Westminster Bank Plc confirming that Completion has
occurred.
<PAGE>
42
SCHEDULE 3:
THE WARRANTIES
1. CAPACITY OF GEC AND FACTUAL INFORMATION IN CERTAIN SCHEDULES
1.1 GEC has the requisite power and authority to enter into and perform this
Agreement, the Tax Covenant and the other documents to be executed by GEC
and delivered at Completion in accordance with this Agreement.
1.2 This Agreement constitutes and the Tax Covenant and the other documents
executed by GEC which are to be delivered at Completion will, when
executed, constitute binding obligations of GEC.
1.3 The execution and delivery of, and the performance by GEC of its
obligations under this Agreement and the Tax Covenant will not:-
(A) result in a breach of any provision of the memorandum or articles of
association of GEC;
(B) result in a breach of any order, judgment or decree of any court or
governmental agency to which GEC is a party or by which GEC is
bound; or
(C) require the consent of its shareholders.
1.4 The facts set out in Schedules 10 and 11 are true and accurate.
2. ACCOUNTS
2.1 The Accounts:-
(A) in respect of each UK Group Company:-
(i) were, at the time they were prepared, prepared in accordance
with the then applicable Statements of Standard Accounting
Practice, as adopted by the Accounting Standards Board and
published by the Institute of Chartered Accountants in England
and Wales, and the then applicable Financial Reporting
Standards, developed and issued by the Accounting Standards
Board, applicable to a United Kingdom company;
(ii) showed a true and fair view of the state of affairs of the UK
Group Company to which such Accounts relate as at the Accounts
Date and of that UK Group Company's result (if any) for the
financial year ended on such date;
<PAGE>
43
(iii) were prepared using accounting policies consistent with those
used in the preparation of accounts for the immediately
preceding accounting period except as described in any notes
thereto; and
(iv) comply with the relevant requirements of the Companies Act
1985;
(B) in respect of Marconi (US) have been prepared for incorporation in
the consolidated accounts of GEC which are prepared in accordance
with UK generally accepted accounting principles, and were prepared
using accounting policies consistent with those used in the
preparation of the accounts of the respective companies for the
immediately preceding accounting period.
(C) in respect of any other Group Company:-
(i) have been drawn up using local accounting principles and,
where the Accounts of the respective Group Company include
notes on accounting policies, subject to such notes; and
(ii) were prepared using accounting policies consistent with those
used in the preparation of the accounts of the respective
Group Company for the immediately preceding accounting period
except as described in any notes thereto.
2.2 The GEC standard accounts form in respect of the other Group Companies
referred to in paragraph 2.1(C) above for the year ended 31 March 1997
have been prepared for incorporation into the consolidated accounts of
GEC which are prepared in accordance with UK generally accepted
accounting principles, and were prepared using accounting policies
consistent with those used in the preparation of the GEC standard
accounts forms of the respective companies for the immediately preceding
accounting period.
2.3 The accounting records of each Group Company have, in the six years
ending on the date of this Agreement, been kept as then required by law.
2.4 For the purposes of this warranty, the term "Management Accounts" means
the figures shown under the heading "Actual" in those unaudited
aggregated management accounts for the Group as at 31st December, 1997
set out in pages 2, 3 and 5 of Disclosure Document 17-116.
Having regard to the purposes for which management accounts are prepared,
the Management Accounts:
(i) have been compiled from information properly extracted from
the books and records of the Group Companies;
<PAGE>
44
(ii) have been based on management accounts of the Group Companies
prepared using accounting policies consistent with those
adopted by the respective companies for the purposes of
reporting to GEC at the Accounts Date which policies are
materially the same as those set out in the Accounts of
Marconi (UK); and
(iii) are not known by GEC to contain any material error or
omissions.
3. PENSIONS
3.1 There are no superannuation or retirement benefits or life assurance
funds schemes or arrangements provided by or on behalf of any UK Group
Company under which any of the Employees is entitled to life assurance
pension or other retirement benefits save those provided by or on behalf
of Marconi (UK) in accordance with the GEC Scheme.
3.2 No UK Group Company is under any contractual obligation nor is it a party
to any custom or practice, to provide life assurance, pension or other
retirement benefits or to pay, provide or contribute towards any
"relevant benefits" within the meaning of section 612, ICTA 1988 in
respect of any of the Employees or for the benefit of any dependants of
any Employee save Marconi (UK) in accordance with the GEC Scheme.
3.3 No power to augment benefits under the GEC Scheme has been exercised
prior to Completion in relation to those of the Employees who are members
of it.
3.4 Marconi (UK) is a participating employer for the purpose of the GEC
Scheme and has fulfilled all its obligations thereunder (including any
obligations to pay contributions).
3.5 The GEC Scheme:
(A) is an exempt approved scheme for the purposes of Chapter I of Part
XIV of ICTA 1988 and so far as GEC is aware there is no reason why
such approval might be withdrawn or cease to apply;
(B) is not a contracted-out scheme under Section 7(3) of the Pension
Schemes Act 1993; and
(C) conforms with the preservation requirements referred to in Section
69(2) of the Pension Schemes Act 1993.
3.6 The GEC Scheme has been operated in all material respects in accordance
with all the then applicable legal requirements in relation to each UK
Group Company and the Employees and there are no outstanding claims or
(so far as GEC is aware) matters likely to give rise to claims against
the GEC Scheme by any UK Group Company or any Employee other than routine
claims for benefits.
<PAGE>
45
3.7 Material details of any superannuation or retirement benefits or life
assurance funds, schemes or arrangements (other than state schemes)
provided by or on behalf of each Group Company under which any of the
overseas Employees is entitled to life assurance, pension or other
retirement benefits, and of all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA) stock options, stock purchases, compensation,
deferred compensation, severance or termination arrangements, and of each
other material plan, arrangement or policy relating to fringe benefits or
other employee benefits maintained, or contributed to, by any GEC Group
Company or Group Company for the benefit of any officers or employees of
Marconi (US) are included in the Disclosure Documents.
3.8 No UK Group Company in the twelve months ending with the Accounts Date or
during the period from the Accounts Date to the date of Completion has
made or proposed any voluntary or ex-gratia payments to any Employee of
any UK Group Company or the dependants of any such Employee in respect of
any relevant benefit (as defined in paragraph 3.2).
3.9 So far as GEC is aware no undertaking or assurance (whether legally
binding or not) has been given by a UK Group Company or GEC to any
Employee of a UK Group Company or the dependant of any such Employee as
to the continuance, introduction, increase or improvement of any such
benefit or scheme or arrangement as is referred to in paragraph 3.2
(including, for the avoidance of doubt, the GEC Scheme).
3.10 Material details of the GEC Scheme, as it relates to Employees of a UK
Group Company or the dependants of any such Employee, have been supplied
to the Purchaser or its legal advisers and (without limitation to the
foregoing) complete up to date and accurate copies of the following have
been disclosed:-
(a) all relevant trust deeds rules or other documents currently
governing the GEC Scheme;
(b) any announcements to members of the GEC Scheme which are not yet the
subject of formal amendment to the documentation of the GEC Scheme
(including any individual or group announcements made to or in
respect of any present or former employee or officer of a UK Group
Company);
(c) the current explanatory booklets and other explanatory literature
issued to persons who are (or are entitled to become) members of the
GEC Scheme;
(d) a list of those Employees of a UK Group Company who are members of
the GEC Scheme with full particulars of them relevant to their
membership of or interest therein and necessary to establish their
entitlements to benefits,
<PAGE>
46
including full particulars of any early retirement options or
facilities, and of any benefit augmentations granted to them under
the GEC Scheme;
(e) the deed of participation under which each UK Group Company which
participates in the GEC Scheme does so;
(f) details of any discretionary benefits provided under, and
discretionary arrangements relating to, Employees of a UK Group
Company who are members of the GEC Scheme, or their dependants,
including any discretionary increases of deferred pensions or
pensions in payment.
3.11 Neither a UK Group Company, nor GEC nor the GEC Scheme is engaged in any
litigation or arbitration proceedings (other than routine claims for
benefits) in respect of any retirement benefits scheme (as defined in
s.611 Taxes Act) or any benefit provided thereunder in relation to the
Employees of a UK Group Company or their dependants or in respect of
which a UK Group Company may be liable to indemnify or compensate and GEC
has had no notice of any submissions to or referrals to the Pensions
Ombudsman or to the Occupational Pensions Advisory Service in respect of
the Employees of a UK Group Company or their dependants. So far as GEC
is aware there are no circumstances which may give rise to any such
complaints.
3.12 No Employee or former employee (excluding any former employee whose
employment terminated before 1st January 1992), of a UK Group Company who
is or was entitled by the rules of the GEC Scheme or by Article 119 of
the Treaty of Rome to membership of the GEC Scheme has been unlawfully
excluded from membership of the GEC Scheme.
3.13 The GEC Scheme has not at any time since 17th May, 1990 but prior to
Completion been operated in such a way as to discriminate between male
and female members of such Scheme.
3.14 The Pension Arrangements referred to in Part A of Schedule 5 do not
conflict with or breach the Trust Deed and/or Rules of the GEC Scheme.
3.15 No event has occurred which would or could result in or entitle any
person or body of persons to wind up, terminate or close the GEC Scheme
in whole or in part, or which is a "relevant insolvency event" in
relation to the GEC Scheme for the purposes of section 75 of the Pensions
Act 1995.
3.16 All life cover benefits are self insured, except for additional death
benefits under the Selected Benefit Scheme.
3.17 The assets, investments and policies held by the trustees of the GEC
Scheme are and will be sufficient to satisfy the liabilities and
obligations (both current and contingent) which the GEC Scheme has
to its members and will continue to be so
<PAGE>
47
sufficient up to and including the Payment Date (as defined in Schedule 5
to this Agreement).
4. ARRANGEMENTS BETWEEN THE GEC GROUP AND THE GROUP
4.1 Save for indebtedness arising and contracts made in the ordinary course
of trading, no contract or other binding legal obligation which will
survive Completion and involves expenditure by either party in excess of
L50,000 is outstanding between any Group Company and any GEC Group
Company.
4.2 No payment has been made by any Group Company to any member of the GEC
Group for services to be provided by a member of the GEC Group during a
period falling wholly or partly after Completion in circumstances where:
(a) those services will not in fact be provided for any part of the
contracted period which falls after Completion as a result of the
relevant Group Company ceasing to be a member of the GEC Group (and no
rebate of the payment will be made) and (b) the amount of the payment
attributable to the contracted period falling after Completion during
which the services will not be provided (calculated on a time
apportionment basis) exceeds L25,000.
5. GROUP STRUCTURE
5.1 The Shares comprise the whole of each Company's issued and allotted share
capital. All the UK Shares are fully paid up and all the US Shares are
fully paid and non-assessable.
5.2 There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right
(conditionally or unconditionally) to call now or in the future for the
allotment or issue of, any shares (including the Shares) or debentures in
or securities of any Group Company.
5.3 Save for any interests held in another Group Company, no Group Company
has any interest in the share capital of any body corporate or
undertaking.
5.4 No Group Company acts or carries on business in partnership or through a
joint venture with any other person or is a member (otherwise than
through the holding of share capital) of any corporate or unincorporated
body, undertaking or association or holds or is liable on any share or
security which is not fully paid up or which carries any liability.
5.5 No Group Company which is incorporated in England and Wales has any
branch, place of business or permanent establishment outside the United
Kingdom.
5.6 Marconi (US) is duly organised, validly existing and in good standing
under the laws of Delaware.
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48
5.7 No Group Company has, at any time in the last three years, repaid,
redeemed or purchased (or agreed to repay, redeem or purchase) any of its
shares, or otherwise reduced (or agreed to reduce) its issued share
capital or any class of it or capitalised (or agreed to capitalise) in
the form of shares, debentures or other securities or in paying up any
amounts unpaid on any shares, debentures or other securities, any profits
or reserves of any class or description or passed (or agreed to pass) any
resolution to do so.
6. OPTIONS, MORTGAGES AND OTHER ENCUMBRANCES
There is no option, right to acquire, mortgage, charge, pledge, lien or
other form of security or encumbrance or equity on, over or affecting the
Shares, the shares in any of the companies referred to in Part B of
Schedule 10 or any of them and there is no agreement or commitment to
give or create any and, so far as GEC is aware, no claim has been made by
any person to be entitled to any, other than any arising from the acts of
the Purchaser, its subsidiaries or subsidiary undertakings.
7. STATUTORY RETURNS
7.1 The copies of the constitutional documents of each Group Company included
in the Disclosure Documents are complete and accurate in all material
respects, have attached to them copies of all resolutions and other
documents required by law to be so attached and set out to the extent
required by applicable law such rights and restrictions attaching to each
class of share capital of that Group Company as are not implied by
relevant statutory law.
7.2 The registers of members (or the equivalent registers) and the other
statutory books (or equivalent books) (including all registers and minute
books) of each Group Company have in all material respects, during the
six years ended on the date of this Agreement, been properly kept as
required by law and no written notice or allegation that has not been
complied with that any of them is incorrect or should be rectified has
been received in the six years ended on the date of this Agreement.
7.3 All documents which should have been delivered within the last six years
by each UK Group Company to the Registrar of Companies, or by any other
Group Company to any equivalent registry in an overseas jurisdiction,
have, in all material respects, been properly so delivered.
8. CONTRACTS
8.1 There are no subsisting contracts to which any Group Company is a party
which were entered into otherwise than in the ordinary course of business
of that Group Company.
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49
8.2 The Disclosure Documents include copies of all agency and distributorship
agreements, and agreements for the provision of consultancy services to
or by a Group Company, to which any Group Company is party.
8.3 There is not outstanding any guarantee, indemnity, performance bond or
suretyship given by any Group Company to secure any obligation of any
person not within the Group.
8.4 There is not outstanding any GEC Security.
8.5 No Group Company has received written notice or (so far as GEC is aware)
oral notice that it is in breach of any contracts with its customers
where there is a substantial likelihood that such breach would be
material in the context of the business of the Group as a whole.
8.6 The Disclosure Documents include details of the Group's contracts with
its 15 principal customers and with its 10 principal suppliers other than
factored product suppliers ("principal" for this purpose meaning those
representing the largest proportion of the Group's income or, as the case
may be, outgoings in the financial year ended on Accounts Date with all
non-sterling amounts converted into sterling at the rate of exchange
applicable as at the date of the particular contract). So far as GEC is
aware, no written notice has been received by any Group Company from any
such principal customer or principal supplier indicating that it will
cease dealing with the Group or substantially reduce the level of its
business with the Group, as a result of the proposed acquisition of the
Companies by the Purchaser or for any other reason.
8.7 The Disclosure Documents include details of all hire purchase contracts
and finance and operating or equipment leases which relate to assets used
by any Group Company to which such Group Company is a party and which
involve an annual charge in excess of L25,000. The aggregate annual
charge of any such contracts not included in the Disclosure Documents and
to which a Group Company is a party does not exceed L100,000.
8.8 There is no outstanding contract with a customer where the value of
deliveries to be made but outstanding at the date hereof exceeds
L1,000,000.
8.9 No Group Company is a party to any agreement which prevents it from
carrying on its business in the ordinary course anywhere in the world.
8.10 No one is entitled to receive from a Group Company a finder's fee,
brokerage or other commission in connection with the sale and purchase of
the Shares under this Agreement.
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50
8.11 No powers of attorney (express or implied), other than to officers or
employees in the ordinary course of their duties, by which a person may
enter into a contract or incur an obligation on behalf of a Group Company
are subsisting.
8.12 There is no distributorship, agency or consultancy agreement to which a
Group Company has been party and which has terminated or expired during
the two years prior to the date of this Agreement or which will terminate
after Completion pursuant to a written notice of termination served prior
to 24th January 1998 or (so far as GEC is aware) since that date but
prior to Completion, in respect of whose termination or expiry any
payment not yet made is or will become due from the relevant Group
Company. No such payment has been made between the Accounts Date and
Completion which is not reflected in the management accounts of the Group
Companies for the period from the Accounts Date to 31st December, 1997.
8.13 So far as GEC is aware, no event has occurred or circumstances arisen
(save for the sale of the Shares pursuant hereto) such that any person is
entitled, or could with the giving of notice and/or lapse of time become
entitled, to require payment before its stated maturity of, or to take
any step to enforce any security for, any non-trading, financial
indebtedness of any member of the Group where such repayment or
enforcement would have a material and adverse effect on the business of
the Group as a whole.
9. EVENTS SINCE THE ACCOUNTS DATE
9.1 Since the Accounts Date:-
(A) the business of each Group Company has been carried on in its
ordinary course;
(B) no resolution of any Group Company in general meeting nor any
written resolution of any Group Company has been passed; and
(C) no dividend or distribution has been declared, paid or made and no
share or loan capital has been issued or agreed to be issued or put
under option by any Group Company;
(D) no part of the business of any Group Companies has, so far as GEC is
aware, been affected to a material extent by any abnormal factor
which has not since the Accounts Date affected similar businesses to
a like extent;
(E) no Group Company has disposed of any material assets, otherwise than
in the ordinary course of business; and
(F) no Group Company has received any material amounts of income or any
material capital payments, nor incurred any material expenditure,
outside the ordinary course of trade.
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In this Warranty 9.1, "material" means material in the context of the
Group's business as a whole.
9.2 Since 30th November, 1997:
(A) no dividends or other distributions have been paid, made or declared
by any Group Company save as provided in Schedule 12;
(B) the total amount of all non-trading indebtedness due to all GEC
Group Companies from all Group Companies has been repaid in full and
at Completion there is no outstanding non-trading indebtedness due
to any Group Company from any GEC Group Company;
(C) otherwise than in the ordinary course of business or reimbursements
of third party costs incurred by a GEC Group Company on behalf of
the Group Company and recharged to that Group Company, no payments
or transfers or surrenders of tax losses or cash entitlements have
been made, and no liability has been incurred, by or to any Group
Company to or by any GEC Group Company, other than those payments
and surrenders indicated in Schedule 12;
(D) other than loans to other Group Companies no loans have been made by
any Group Company otherwise than in the ordinary course of business
which have not been repaid in full before Completion; and
(E) no gratuitous payment in excess of L25,000 has been made by any
Group Company.
9.3 A list of all current individual legally binding capital commitments of
each Group Company in excess of L50,000 is included in the Disclosure
Documents.
9.4 No Group Company was at the Accounts Date or has since that date become
party to any borrowing or financing agreement outside the ordinary course
of its trading with any person whose business comprises the lending of
money or the financing of the purchase of assets, under which financing
facilities have been made available to the Group Company concerned on a
basis which would not, in accordance with any relevant legislation or
applicable accounting standards, be required to be disclosed in the
relevant Group Company's published accounts.
10. GRANTS
Details of all grants, aid and subsidies paid or made to any Group
Company during the last six years by, and of all outstanding claims by
any Group Company for any such grant, aid or subsidy from, any
supra-national, national or local authority or government agency are
included in the Disclosure Documents and, except in relation to the sale
of the Shares, none of GEC, any GEC Group Company or any Group
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52
Company has done or failed to do any act or thing which there is a
substantial likelihood could result, in all or any part of such grant aid
or subsidy becoming repayable or forfeited or being withheld.
11. LICENCES AND RESTRICTIONS ON THE BUSINESS OF EACH GROUP COMPANY
11.1 Each Group Company has all material statutory and regulatory licences,
consents, permissions and approvals required for the carrying on of the
business now being carried on by it and, so far as GEC is aware, is not
in breach of the terms or conditions of any such licences, consents,
permissions or approvals where such breach would have an adverse effect
which is material in the context of the Group's business as a whole.
11.2 All licences, consents, permissions and approvals referred to in
sub-paragraph above are in full force and effect, and GEC is not aware
that there are any circumstances which indicate that there is a
substantial likelihood that any of such licences, consents, permissions
or approvals will or may be suspended, revoked or not renewed or which
may confer a right of revocation or that the terms may be altered to the
detriment of the relevant Group Company except in relation to the sale of
the Shares.
11.3 No Group Company has exported or imported any products or technical data
which is the subject of the United Kingdom and/or United States export
regulations and laws without obtaining the necessary approvals and
licences from the relevant governmental authorities and without observing
the requirements of any such approvals or licences with respect to the
recording of the details of any transaction made or of any technical data
exported or imported.
12. BANK ACCOUNTS AND BORROWINGS
12.1 Details of all bank accounts maintained or used by each Group Company
(including, in each case, the name and address of the bank with whom the
account is kept and the number and nature of the account) are included in
the Disclosure Documents.
12.2 The Disclosure Documents include details of all overdraft, loan and other
financial facilities available to the Group.
12.3 Except for borrowings between Group Companies, no Group Company has any
outstanding loan capital nor has any Group Company incurred or agreed to
incur any borrowing which it has not repaid or satisfied, or lent or
agreed to lend any money which has not been repaid to it or owns the
benefit of any debt present or future (other than debts due to it or owed
to it in the ordinary course of trading).
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53
13. INSOLVENCY
13.1 No resolution has been passed for the winding up of any Group Company or
for a provisional liquidator to be appointed in respect of any Group
Company and no meeting has been convened and, so far as GEC is aware, no
petition has been presented for the purpose of winding up any Group
Company.
13.2 No administration order has been made and, so far as GEC is aware, no
petition for such an order has been presented in respect of any Group
Company.
13.3 (A) No receiver (which expression shall include an administrative
receiver) has been appointed in respect of any Group Company or all
or any of its assets;
(B) Marconi Messtechnik GmbH has not itself filed nor, as far as GEC is
aware, has any other person filed a petition for the institution of
insolvency proceedings against Marconi Messtechnik GmbH nor has
Marconi Messtechnik GmbH offered or made a settlement or moratorium
in court or out of court with its creditors generally.
13.4 (A) No UK Group Company is insolvent, or unable to pay its debts within
the meaning of section 123 Insolvency Act 1986, or has stopped
paying its debts as they fall due.
(B) Marconi Instruments SA is not insolvent or unable to pay its debts
("en etat de cessation des paiements") within the meaning of French
law No. 85-98 of 25th January 1985 or has stopped paying its debts
as they fall due.
13.5 (A) No voluntary arrangement has been proposed under section 1
Insolvency Act 1986 in respect of any UK Group Company.
(B) Marconi Instruments SA has not applied, pursuant to French law No.
84-148 of 1st March, 1984, for the appointment of a conciliateur or
entered into an amicable settlement (REGLEMENT AMICABLE) with its
creditors or made any application to any court under Article 1244-1
of the French Civil Code. No corporate action, legal proceedings or
other steps have been taken pursuant to French law No. 85-98 of 25th
January, 1985 with respect to the appointment of an ADMINISTRATEUR
JUDICIAIRE, to any kind of term of payment with creditors or to any
judgment delivered with respect to its REDRESSEMENT JUDICIAIRE or
LIQUIDATION JUDICIAIRE or to the transfer of the whole or part of
its business (CESSION TOTALE OU PARTIELLE DE L'ENTRPRISE), its
reorganisation or its dissolution.
(C) No court of competent jurisdiction has entered an order or decree
under Title 11, UNITED SATES CODE, or any similar Federal or state
law for the relief of debtors (collectively, "US BANKRUPTCY LAWS")
that (i) is for relief against Marconi (US) in an involuntary case,
(ii) appoints a receiver, trustee, assignee, liquidator, custodian
or similar official (each, a "CUSTODIAN") of Marconi (US)
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54
or for any substantial part of its property, or (iii) orders the
winding up or liquidation of the Company.
(D) Marconi (US) has not, pursuant to or within the meaning of any US
Bankruptcy Law, (i) commenced a voluntary case, (ii) consented to
the entry of an order for relief against it in an involuntary case,
(iii) consented to the appointment of a Custodian of it or for any
substantial part of its property, or (iv) made a general assignment
for the benefit of its creditors.
(E) Marconi Instrumentos S.A. has not filed a petition for the
institution of suspension of payments ("suspension de pagos") or
bankruptcy proceedings ("quiebra") and, as far as GEC is aware, no
bankruptcy of Marconi Instrumentos S.A. has been declared as the
result of a third party's petition, nor has Marconi Instrumentos
S.A. ceased paying its debts as they fall due.
14. LITIGATION
14.1 Other than in respect of the payment and collection of debts in the
ordinary course of its business, no Group Company is engaged in any
litigation, arbitration or criminal proceedings, whether as plaintiff,
defendant or otherwise, and no litigation, arbitration or criminal
proceedings by or against any Group Company is pending, or (so far as GEC
is aware) threatened, the adverse determination of which would have a
material and adverse effect on the business of the Group as a whole, and
so far as GEC is aware there are no facts or circumstances which are
reasonably likely to give rise to such proceedings.
14.2 No Group Company is subject to any order or judgment given by any court
(including, without limitation, any injunction or order for specific
performance) which is still in force and has not given any undertaking to
any court arising out of any legal proceedings which remains outstanding.
15. COMPLIANCE WITH LAWS AND NO INVESTIGATION
15.1 No Group Company's business is being conducted in contravention of any
relevant legislation the consequences of which contravention have a
material and adverse effect on the business of the Group as a whole.
15.2 No Group Company has received written notification nor, so far as GEC is
aware, oral notification that any non-routine investigation or inquiry is
being conducted by any governmental or other regulatory body in respect
of its affairs in respect of which there is a reasonable likelihood that
such investigation or inquiry will lead to proceedings, the adverse
determination of which would have a material and adverse effect on the
business of the Group as a whole.
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55
15.3 So far as GEC is aware, no Group Company has committed or omitted to do
any act or thing which could give rise to any fine or penalty and no
Group Company is or has been a party to any agreement, practice or
arrangement which:
(A) contravenes the Trade Descriptions Act 1968;
(B) contravenes or is invalidated (in whole or in part) by or is subject
to registration under the Restrictive Trade Practices Acts 1976 and
1977;
(C) contravenes any provisions of the Treaty of Rome; or
(D) contravenes any other anti-trust, anti-monopoly or anti-cartel
legislation or regulations or constitutes an anti-competitive
practice as defined in the Competition Act 1980
in circumstances where the amount of the fine or penalty or the breach or
contravention is likely to have a material adverse effect on the business
of the Group as a whole.
16. OWNERSHIP OF ASSETS
16.1 Each of the tangible assets (other than the Properties) included in the
Accounts as being owned by any Group Company, or acquired by such Group
Company since the Accounts Date and which, if acquired before such date,
would have been included in the Accounts, (other than assets sold,
realised or applied in the normal course of business) where such asset
has a current net book value in excess of L500 and is used by or is
available for use by that Group Company at the date of this Agreement is
owned both legally and beneficially by that or another Group Company and
no Group Company has granted any option, right to acquire, mortgage,
charge, pledge, lien or other form of security or encumbrance over any
such asset, subject in any case to retention of title and vendor's liens
arising in the ordinary course of business and liens arising by operation
of law.
16.2 No Group Company has in its possession or under its control any jigs,
tooling, test or other equipment procured or provided under a contract
with the MOD and which is subject to MOD conditions of contract DEFCON 23
and/or DEFCON 527.
17. OWNERSHIP OF LAND
17.1 The Properties are the only immovable properties owned, used or occupied
by a Group Company or in respect of which any Group Company has any
estate, interest, right or ownership.
17.2 In relation to each of the Properties referred to in Parts A and B of
Schedule 11:-
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56
(A) the relevant Group Company specified in Schedule 11 as registered
proprietor or Lessee of the Property (the "Owner") is solely legally
and beneficially entitled to the Property and the Owner has under
its control all of the title deeds and documents listed in the
Disclosure Letter;
(B) the Owner holds the Property subject to the leases, underleases,
sub-leases, tenancies or licences particulars of which are set out
in the Disclosure Documents but is otherwise in physical possession
and actual occupation of the Property;
(C) GEC has not been notified in writing nor is it aware that the Owner
has been notified in writing of a breach by it of any material
provision of any lease under which it holds the Property where such
breach is still outstanding;
(D) GEC has not received nor is it aware that the Owner as its owner has
received notice in writing of any outstanding material breach under
planning legislation in respect of the Property;
(E) GEC has not received nor is it aware that the Owner has received
notice in writing of any compulsory purchase order affecting the
Property which is currently in force;
(F) GEC has not received nor is it aware that the Owner has received
notice in writing of any legal proceedings (which in this context
also means proceedings under any legislation or statutory
regulations directions or similar matters not covered in Warranty
17.2(D)) or notice in writing of any circumstance which in the
reasonable opinion of GEC or the Owner will result in legal
proceedings in respect of the Property which are or are likely to be
material in the context of the business carried on by the Group as a
whole.
(G) GEC has not received nor is it aware that the Owner has received
notice in writing of any outstanding material breach of a condition
of any fire certificate issued in respect of the Property.
17.3 GEC has not received nor is it aware that any Group Company has received
notice in writing of any liability (whether actual or contingent) in
relation to any leasehold property which such Group Company has assigned
or otherwise disposed of.
17.4 So far as GEC is aware, the Properties referred to in Part C of Schedule
11 are held pursuant to the tenancy agreement or licence described in
Part C of Schedule 11 and so far as GEC is aware it has neither received
nor been notified in writing nor is it aware of a material breach of that
tenancy agreement or licence (as the case may be) where that breach is
still outstanding.
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57
18. INTELLECTUAL PROPERTY
18.1 Details of all registered Intellectual Property owned by a Group Company
and details of all applications for registration thereof are included in
the Disclosure Documents and such Intellectual Property is beneficially
owned by the relevant Group Company free from all charges or similar
encumbrances save for any licence disclosed pursuant to Warranty 18.3.
18.2 All renewal fees and administrative steps required for the maintenance of
the rights disclosed pursuant to sub-paragraph 18.1 have been paid or
taken and GEC is not aware of any challenge or attack by a third party or
competent authority to such rights.
18.3 Details of all licences (excluding shrink-wrap software licences) granted
to or by a Group Company in respect of any Intellectual Property and in
respect of any confidential information or know-how are set out in the
Disclosure Documents and no Group Company is in material breach of any
such licence and, so far as GEC is aware, no other party thereto is in
material breach of any such licence.
18.4 So far as GEC is aware, the processes and methods employed, the services
provided, the businesses conducted and the products used or dealt in by
Group Companies in relation to their business as carried on at the date
of this Agreement do not infringe the rights of any other person in any
Intellectual Property or any confidential information or know-how.
18.5 So far as GEC is aware, there is no unauthorised use or infringement by
any person of any Intellectual Property owned by a Group Company.
18.6 So far as GEC is aware, no employee of the Group or any other person has
made or has threatened to make any claim under the provisions of section
40 of the Patents Act 1977 in relation to the patents and patent
applications of the Group Companies.
18.7 So far as GEC is aware, none of the products or computer software of the
Group have been developed with funds provided by the United Kingdom
Ministry of Defence or the Government of the United States in
circumstances in which the relevant Government has a right to have
manufactured or used by a third party free of any payment the relevant
products or software and/or has the right to receive payment by way of
commercial exploitation levy or otherwise in respect of any sale of any
such products or licensing of any such software by any member of the
Group and where in any such case the products or software are material in
the context of the relevant Group Company's business.
18.8 GEC is not aware of any reason why IBM will refuse to grant to a Group
Company a licence on the terms laid down in the GEC-IBM cross-licence or
why GEC will not be able to grant to a Group Company a sub-licence
pursuant to the AT&T/Lucent cross-
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58
licence and GEC undertakes to give all reasonable assistance to the
Purchaser at the Purchaser's cost and expense in relation to the grant of
such licences.
18.9 So far as GEC is aware, details of all use at Completion made by Group
Companies of patents owned by the GEC Group have been disclosed.
19. INSURANCES
Details of all material insurance policies maintained by or on behalf of
each Group Company are included in the Disclosure Documents, and so far
as GEC is aware, all such policies are in force and, so far as GEC is
aware, no Group Company has done anything or omitted to do anything as a
result of which any of such policies is void or voidable and no claims
are outstanding for amounts in excess of L50,000 under each such policy,
nor is GEC aware of any circumstances likely to give rise to such a
claim.
20. EMPLOYEES
20.1 The name and particulars of remuneration and material benefits of the
Employees as at 16th January, 1998 are included in the Disclosure
Documents and such particulars are true and accurate in all material
respects and since 31st July, 1997, no Employee with an annual basic
salary in excess of L50,000 has ceased to be an Employee, has been taken
on or has given notice terminating his contract of employment and no
person has been offered employment with an annual basic salary in excess
of L50,000. Since 16th January 1998 there has been no general change
made or announced in the remuneration payable to Employees or the
contractual obligations of relevant employers to Employees, and no change
made or announced in the remuneration payable to any Employee with an
annual basic salary in excess of L50,000 or in the contractual
obligations of the relevant employer to any such Employee.
20.2 The contract of employment of each Employee may be terminated by the
relevant employer without damages or compensation (other than that
payable by statute) by the giving of not more than 13 weeks' notice at
any time.
20.3 The Disclosure Documents contain copies of all the standard terms and
conditions, staff handbooks and policies which apply to the Employees.
20.4 No current Employee has any legally binding entitlement to any payment in
excess of a statutory redundancy payment on termination of the Employee's
contract of employment by reason of redundancy, except as set out in the
Disclosure Documents.
20.5 Neither any Group Company nor GEC has any outstanding notice of a claim
of any failure to comply in a material respect with any relevant
provisions of the Treaty of Rome, EC Directives, statutes, regulations,
collective agreements, terms and conditions of employment, or orders,
declarations and awards of any court or tribunal relevant to the
Employees or the relations between any Group Company and any
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59
trade union, staff association or any other body representing workers.
Neither GEC nor any Group Company is aware of any circumstances which
might constitute material non-compliance with any of the above.
20.6 There is no material dispute with any trade union or other such
representative body existing or, so far as GEC is aware, pending or
threatened in relation to the business of any Group Company.
20.7 Copies of all (if any) collective agreements and recognition agreements
for the time being affecting the Employees or their conditions of service
are included in the Disclosure Documents.
20.8 Within the year immediately preceding the date of this Agreement, no UK
Group Company has given notice of any redundancies to the Secretary of
State or started consultations with any independent trade union under the
provisions of Part IV, TULRCA or failed in any material respect to comply
with any such obligation under the said Part IV.
20.9 So far as GEC is aware, there is not outstanding any material dispute or
material claim by any Employee or any former employee of any Group
Company.
20.10 There are no enquiries or investigations of which GEC or any Group
Company has notice existing, pending or threatened affecting any Group
Company in relation to any employees by the Equal Opportunities
Commission, the Commission for Racial Equality or the Health and Safety
Executive or any other bodies with similar functions or powers in
relation to employees.
20.11 No Employee has been offered, or has agreed to, any retention package
except as set out in the Disclosure Documents.
20.12 There are no amounts in excess of L5,000 per Employee owing from, or
agreed to be loaned or agreed to be advanced to any of the Employees,
other than any amounts representing remuneration accrued due for the
current pay period, accrued holiday pay or for reimbursement of expenses.
21. THE ENVIRONMENT
21.1 So far as GEC is aware, the business of each Group Company is being
conducted in compliance, insofar as material to the business of the Group
as a whole, with Environmental Laws and Permits and (without prejudice to
the generality of the forgoing) so far as GEC is aware each Group Company
has complied in all material respects with all Environmental Laws for the
time being in force in relation to the Properties or any Process.
21.2 So far as GEC is aware, each Group Company has all Permits necessary for
the operation of the business of such Group Company and no Group Company
has
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received any written notice or other written or recorded communication of
any decision or proposal by any competent authority to revoke, modify or
vary any Permit.
21.3 So far as GEC is aware, no circumstance exists (other than the sale of
the Shares) which is likely to result to the material detriment of the
Group as a whole, in suspension or revocation of any Permit or is likely
to result in any such Permit not being renewed or granted and so far as
GEC is aware the sale of the Shares will not result ipso facto in any
such Permit being suspended or revoked.
21.4 So far as GEC is aware, no material work or material expenditure is
required under any Environmental Laws in order to carry on the business
of any Group Company where failure to carry out such work or to incur
such expenditure as at the date of this Agreement is a breach of
Environmental Laws or any Permit.
21.5 At no time within the last three years has any Group Company received any
written notice, claim or other written or recorded communication alleging
any actual or potential breach of Environmental Laws which is outstanding
as at the date of this Agreement.
21.6 None of the Properties or property in which any Group Company formerly
had any estate or interest have been designated contaminated land by any
competent authority under the Environmental Laws or are subject to any
statutory notice requiring works due to contamination nor is GEC or any
Group Company aware of any circumstances rendering such designation or
such works likely.
21.7 In relation to the Environment and/or Environmental Laws in respect of
the current businesses of each Group Company and in respect of the
Properties and the Process GEC has, so far as it is aware, made available
to the Purchaser complete and accurate copies of all current Permits and
all GEC and third party environmental audit reports and GEC health and
safety reports produced in the last 3 years.
21.8 So far as GEC is aware no Group Company has in relation to the business
of the Company any liability in respect of any material breach of or
material non-compliance with any Environmental Laws and/or Permits in
respect of any freehold or leasehold property in which it formerly had
any estate or interest.
21.9 So far as GEC is aware, within the last three years no Group Company has
disposed of any Dangerous Substance in such a way that its disposal would
constitute a breach of Environmental Laws.
22. THE ACCOUNTS AND TAX
22.1 No Group Company has any liability in respect of Taxation that is not
disclosed or provided for in the Accounts and, in particular, has no
outstanding liability for:-
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(A) Taxation in any part of the world assessable or payable by reference
to profits, gains, income or distributions earned, received or paid
or arising or deemed to arise on or at any time prior to the
Accounts Date or in respect of any period ending on or before the
Accounts Date; or
(B) customs duties or purchase, value added, sales or other similar tax
in any part of the world referable to transactions effected on or
before the Accounts Date;
that is not provided for in the Accounts.
22.2 The amount of the provision for deferred Taxation in respect of each
Group Company contained in the Accounts was, at the Accounts Date, in
accordance with accountancy practices generally accepted in the United
Kingdom or the relevant jurisdiction of incorporation and commonly
adopted by companies carrying on businesses similar to those carried on
by that Group Company.
22.3 If all facts and circumstances which are now known to the Group or to GEC
had been known at the time the Accounts were drawn up, the provision for
deferred Taxation that would be contained in the Accounts would be no
greater than the provision which is so contained.
23. TAX EVENTS SINCE THE ACCOUNTS DATE
23.1 Since the Accounts Date:
(A) no Group Company has made any distribution of assets or repayment of
capital;
(B) no accounting period of any Group Company has ended;
(C) no Group Company has paid or become liable to pay any interest or
penalty in connection with any tax, or has otherwise paid any tax
after its due date for payment;
(D) no Group Company has received a payment for the surrender of group
relief in accordance with Chapter IV of Part X to ICTA 1988 or for
the surrender of advance corporation tax under section 240 ICTA 1988
which, so far as GEC is aware, it may be required to refund in whole
or in part, nor has any Group Company agreed to surrender any right
it may have to receive a tax refund under section 102 Finance Act
1989.
23.2 So far as GEC is aware, since the Accounts Date:
(A) no Group Company has paid any dividend by reference to which it will
or may be liable to Tax;
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(B) there has been no disposal of any asset (including trading stock) or
supply of any service or business facility of any kind (including a
loan of money or the letting, hiring or licensing of any property
whether tangible or intangible) in circumstances where the
consideration actually received or receivable for such disposal or
supply was materially less than the consideration which could be
deemed to have been received for tax purposes;
(C) no event has occurred which will give rise to a tax liability on any
Group Company calculated by reference to deemed (as opposed to
actual) income, profits or gains or which will result in such Group
Company becoming liable to pay or bear a tax liability directly or
primarily chargeable against or attributable to another person, firm
or company;
(D) no disposal has taken place or other event occurred which will or
may have the effect of crystallising a liability to Taxation which
should have been included in the provision for deferred Taxation
contained in the Accounts if such disposal or other event had been
planned or predicted at the Accounts Date;
(E) no Group Company has incurred expenditure of a revenue nature or
entered into a commitment to incur expenditure of a revenue nature
which will not be deductible in computing trading profits for the
purposes of corporation tax, or be deductible as a management
expense of an investment company, other than expenditure at a rate
proportionately no greater than the corresponding rate for the
accounting period ending on the Accounts Date;
(F) no Group Company has become liable to pay any interest or penalty in
connection with any tax or owes any tax the due date for payment of
which has passed or will arise in the 30 days after the date of this
Agreement;
(G) no Group Company has made or agreed to make a surrender of or claim
for group relief under Chapter IV of Part X to ICTA 1988, or a
surrender of any amount of advance corporation tax under ICTA 1988
section 240; for the avoidance of doubt, this warranty 23.2(G) does
not apply to any arrangements made under or pursuant to the Tax
Covenant.
24. TAX RETURNS, DISPUTES, RECORDS AND CLAIMS, ETC.
24.1 So far as GEC is aware, each Group Company has, within the requisite
periods, made or caused to be made all proper returns and notifications
required to be made and supplied or caused to be supplied all material
information (including computations) required to be supplied to any
revenue or income tax authority within the last six years.
24.2 So far as GEC is aware, there is no significant dispute or disagreement
outstanding nor is any contemplated at the date of this agreement with
any revenue authority
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regarding liability or potential liability to any tax or duty
(including in each case penalties or interest) recoverable from any
Group Company or regarding the availability of any relief from tax
or duty to such Group Company and there are no circumstances which
make it likely that any such dispute or disagreement will commence.
24.3 So far as GEC is aware, each Group Company has sufficient records
relating to past events, including any elections made, to calculate the
tax liability or relief which would arise on any disposal or on the
realisation of any asset owned at the Accounts Date by that Group Company
or acquired by that Group Company since that date but before Completion.
24.4 So far as GEC is aware, each Group Company has duly submitted all claims,
elections and disclaimers which have been assumed to have been made for
the purposes of the Accounts.
24.5 The amount of tax chargeable on any Group Company during any accounting
period ending on or within six years before the Accounts Date has not, to
any material extent, depended on any concession, agreement or other
formal or informal arrangement with any revenue or income tax authority.
24.6 No Group Company has received any written notice from any revenue or
income tax authority which required or will or may require it to withhold
tax from any payment made since the Accounts Date or which will or may be
made after the date of this agreement, other than normal withholdings of
social security contributions or taxes on earnings.
24.7 All particulars furnished to any Tax authority in connection with an
application for any statutory consent or clearance on behalf of any Group
Company fully and accurately disclosed everything material to the
decision of the authority in question and any transaction for which
consent or clearance was obtained has been carried into effect (if at
all) only in accordance with the terms of the application and the consent
or clearance.
24.8 So far as GEC is aware, no Group Company has taken any action which has
prejudiced any arrangement or agreement which it has with a Tax
authority.
24.9 Any surrender of advance corporation tax by a member of the GEC Group to
a Group Company has been properly documented and (in particular) all
necessary claims in respect of such surrender have been submitted to the
Inland Revenue.
25. STAMP DUTY
So far as GEC is aware, each Group Company has duly paid any stamp duty
or other similar duty, levy or transaction tax for which it is liable and
all documents which are required to be stamped, by virtue of which any
Group Company has any right
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material to the business of the Group as a whole and which are in
the possession, power or control of any Group Company or to the
production of which any Group Company is entitled (including for
the avoidance of doubt the duplicate of the registered transfer of
the St. Albans Property dated 22nd August 1997) have been duly
stamped.
26. VALUE ADDED TAX
26.1 Each Group Company has complied with any obligation to register for the
purposes of any purchase, value added, sales or other similar tax in any
part of the world and has complied in all material respects with its
other obligations (including, without limitation, with regard to
record-keeping and the timing of its payment of any such tax) under any
legislation relating to such tax or arising from any directions issued
under such legislation.
26.2 Each Group Company resident in a member state of the European Union has
been or will be able to recover or obtain credit for all amounts in
respect of VAT it has incurred since the Accounts Date.
26.3 The only Group Companies which form part of the VAT Group (as defined in
the Tax Covenant) are Marconi Instruments International Limited of
Longacres House, Norton Green Road, Stevenage, Hertfordshire SG1 2BA
(registered in England No. 934595), Sanders Instruments Limited of
Longacres House, Norton Green Road, Stevenage, Hertfordshire SG1 2BA
(registered in England No. 607978) and Marconi (UK).
26.4 No election under paragraph 2 of Schedule 10 VATA 1994 to waive exemption
from VAT in relation to any of the Properties in the United Kingdom has
been made by a Group Company or, so far as GEC is aware, by a predecessor
in title.
26.5 No direction has been given by H.M. Customs & Excise under Schedule 9(A)
VATA 1994 in relation to any Group Company and, so far as GEC is aware,
there are no grounds under which such a direction is likely to be given.
27. DUTIES, ETC.
All value added tax, import duty, excise duties and other similar taxes,
duties or charges payable to any tax authority upon the importation of
goods or in respect of any assets (including trading stock) imported,
owned or used by a Group Company have been paid in full.
28. TAX ON DISPOSAL OF ASSETS
On a disposal of all its assets by a Group Company for:-
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(A) in the case of each asset owned by a Group Company at the Accounts
Date, a consideration equal to the value attributed to that asset in
preparing the Accounts; or
(B) in the case of each asset acquired since the Accounts Date, a
consideration equal to the consideration given for the acquisition
then either:-
(a) in respect of any asset falling within (A) above, the liability
to tax (if any) which would be incurred by a Group Company in
respect of that asset would not exceed the amount taken into
account in respect of that asset in computing the maximum
liability to deferred Taxation as stated in the Accounts; or
(b) in respect of any asset within (B) above, no tax liability
would, so far as GEC is aware, be incurred by a Group Company
in respect of that asset.
29. NON-DEDUCTIBLE REVENUE OUTGOINGS
So far as GEC is aware, no Group Company is under any obligation to make
any future payment of a revenue nature which will be prevented (whether
on the grounds of being a distribution or for any other reason) from
being deductible for corporation tax purposes, whether as a deduction in
computing the profits of a trade or as an expense of management or as a
charge on income or (in the case of Group Companies subject to UK
corporation tax) as a non-trading debit under Chapter II Part IV Finance
Act 1996, by reason of any Tax legislation.
30. DEDUCTIONS AND WITHHOLDINGS
During the last six years, each Group Company has so far as GEC is aware
made all deductions in respect or on account of any tax from any payments
made or benefits provided by it which it is obliged or entitled to make
and has accounted to the appropriate authority for all amounts so
deducted.
31. INTRA-GROUP TRANSACTIONS
No Group Company has, at any time within the seven years ending on the
Completion Date, acquired any asset from any other company which was, at
the time of the acquisition, a member of the same group of companies as
that member for the purposes of any tax.
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66
32. RESIDENCE
(A) So far as GEC is aware, the country which is given in Schedule 8 as
the tax residence of each Group Company is the only country whose
tax authorities seek to charge tax on the world-wide profits or
gains of that Group Company and that Group Company has never paid
tax on income, profits or gains to any tax authority in any other
country except that mentioned in Schedule 10 in respect of it.
(B) No notice of the making of a direction under section 747 ICTA 1988
has been received by a Group Company and, so far as GEC is aware, no
circumstances exist which will lead to the making of such a
direction.
33. GROUP INCOME
33.1 No assessment has been made under section 247 ICTA 1988 on a Group
Company in respect of advance corporation tax which ought to have been
paid or income tax which ought to have been deducted.
33.2 Save as disclosed, no assessment may so far as GEC is aware be made under
section 247 ICTA 1988 on a Group Company in respect of advance
corporation tax which ought to have paid or income tax which ought to
have been deducted since the Accounts Date.
34. REDUCTION OR ADJUSTMENT OF LOSSES
No Group Company has engaged in or been a party to any transaction as a
result of which sections 176 or 177 TCGA would apply to reduce the
allowable loss on the disposal of any share or security by any Group
Company or as a result of which the chargeable gain or allowable loss
arising on the disposal of an asset by a Group Company would be adjusted
in accordance with section 30 TCGA 1992.
35. FOREIGN EXCHANGE AND FINANCIAL INSTRUMENTS
35.1 No Group Company has ever made any claims under section 139 Finance Act
1993 in respect of any foreign exchange or gain.
35.2 No Group Company has ever made any election to treat any qualifying
assets or qualifying liabilities as matched pursuant to the Exchange
Gains and Losses (Alternative Method of Calculation of Gain or Loss)
Regulations 1994.
35.3 So far as GEC is aware, no Group Company has since the Accounts Date
entered into a qualifying contract under Chapter II of Part IV Finance
Act 1994 which remains outstanding.
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67
35.4 Neither any Group Company nor the principal company of any group of which
a Group Company is (or has ever been) a member has made any election
under section 148 Finance Act 1994.
36. DATA PROTECTION
36.1 Each Group Company which is required to do so under the Data Protection
Act 1984 has duly registered as a data user.
36.2 So far as GEC is aware, each Group Company has complied in all material
aspects with the data protection principles set out in the Data
Protection Act 1984.
36.3 No individual has claimed compensation from a Group Company under the
Data Protection Act 1984.
37. SHARE CERTIFICATES
The share certificates relating to shares in the Group Companies
incorporated in England listed in Part B of Schedule 10 which are
registered in the name of Marconi (UK) or an Employee are in the
possession or control of Group Companies.
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68
SCHEDULE 4:
LIMITATIONS ON GEC'S LIABILITY UNDER THE WARRANTIES
1. AGREEMENTS TO WHICH THIS SCHEDULE IS APPLICABLE
The parties intend that the provisions in this Schedule apply to this
Agreement and, where so stated, to the Tax Covenant and the Environmental
Undertaking. The provisions of paragraphs 4, 5, 6, 7 and 11 shall apply
with respect to claims under clauses 9.1 and 9.15 of this Agreement as
they apply to claims under the warranties and shall be construed
accordingly.
2. WARRANTIES
2.1 Notwithstanding anything in this Agreement to the contrary, the
provisions of this Schedule shall operate to limit the liability of GEC
in respect of any claim by the Purchaser for any breach of the Warranties
and, where so stated, the Tax Covenant.
2.2 The only Warranties given:
(A) in respect of Intellectual Property are those contained in
paragraph 18 of Schedule 3 and each of the other Warranties shall be
deemed not to be given in relation to Intellectual Property;
(B) in respect of matters related to the Environment, are those
contained in paragraphs 14 and 21 of Schedule 3 and each of the
other Warranties shall be deemed not to be given in relation to any
matter related to the Environment;
(C) in respect of any Property (excluding matters related to the
Environment which affect any Property, to which paragraph (B) above
applies), are those contained in paragraph 17 of Schedule 3 and each
of the other Warranties shall be deemed not to be given in relation
to the Properties; and
(D) in respect of Tax, are those contained in paragraphs 22 to 35 of
Schedule 3 and each of the other Warranties shall be deemed not to
be given in relation to Tax.
3. LIMITATIONS ON LIABILITY UNDER WARRANTIES AND UNDERTAKINGS
3.1 LIMITATIONS ON AMOUNT
(A) The Purchaser shall not in any event be entitled to damages in
respect of any claim or claims under any of the Warranties (other
than Warranties 3.17 and 9.2) or the Tax Covenant or the
Environmental Undertaking, except as follows:-
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(i) in respect of any individual claim, whether under the
Warranties (other than Warranties 3.17 and 9.2), the Tax
Covenant (not being a claim arising under clause 2A(iv), (v)
or (vi) of the Tax Covenant or in respect of the Pre-Sale
Dividend) or the Environmental Undertaking, unless the amount
for which GEC is finally liable exceeds L50,000; and
(ii) in respect of all such claims, unless and until, in the case
of claims under the Warranties other than Warranties 3.17 and
9.2 the aggregate amount of all such claims (but ignoring
claims made under the Tax Covenant and the Environmental
Undertaking) for which GEC is finally liable exceeds
L2,000,000, in which event the Purchaser shall be liable for
the full amount of the claims (excepting always those
individual claims excluded under sub-paragraph (i) above);
and GEC shall be finally liable only if the amount of each such
claim and the aggregate of all such claims which are admitted or
proved in a court of competent jurisdiction exceed the relevant
figure specified in sub-paragraph (i) or (ii) (as the case may be)
above.
(B) The total aggregate liability of GEC for breach of the Warranties
(other than Warranties 3.17 and 9.2) and under the Tax Covenant and
the Environmental Undertaking shall not in any event exceed
L40,000,000 (and GEC's liability under the Environmental Undertaking
shall not in any event exceed L10,000,000 within that cap), save
that the aggregate liability of GEC in respect of any breach or
breaches of any Warranties relating to GEC's title to the Shares
shall be unlimited.
(C) For the purpose of sub-paragraph 3.1(A)(i), claims arising out of
the same causal event, matter or practice shall be aggregated and
treated as a single claim.
3.2 TIME LIMITS FOR BRINGING CLAIM
(A) No claim shall be brought against GEC in respect of any breach of
the Warranties unless the Purchaser shall have given to GEC written
notice of such claim specifying (in reasonable detail) the matter
which gives rise to the breach or claim, the nature of the breach or
claim and the amount claimed in respect thereof (detailing to the
extent reasonably practicable the calculation of the loss thereby
alleged to have been suffered by the Purchaser) on or before 31st
December, 1999 or, in the case of claims arising under the
Environmental Warranties or under the Environmental Undertaking,
five years after the Completion Date or, in the case of claims
arising under the Warranties contained in paragraphs 22 to 35 of
Schedule 3, seven years from the Completion Date.
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PROVIDED that the liability of GEC under this sub-paragraph shall
absolutely determine (if such claim has not been previously
satisfied, settled or withdrawn) if legal proceedings in respect of
such claim shall not have been commenced within six months of the
service of such notice and for this purpose proceedings shall not be
deemed to have been commenced unless they shall have been properly
issued and validly served upon GEC.
(B) No claim shall be brought against GEC under Warranty 3.17 after the
Transfer Amount (as defined in Schedule 5) has been paid in
accordance with Schedule 5.
4. CONDUCT OF LITIGATION
Upon the Purchaser becoming aware of any claim, action or demand against
it or matter likely to give rise to any of these in respect of the
Warranties or the Environmental Undertaking (a "Claim"), the Purchaser
shall and shall procure that the relevant Group Company shall:-
(A) within 45 working days (or such shorter period as is necessary to
enable GEC to make a substantive response to any such Claim) notify
GEC by written notice as soon as it reasonably appears to the
Purchaser that any such Claim of a third party received by or coming
to the notice of the senior management of the Purchaser may result
in a claim under the Warranties or the Environmental Undertaking;
(B) subject to GEC indemnifying the Purchaser and/or the relevant Group
Company to their reasonable satisfaction against any liability,
costs, damages or expenses which may be reasonably and properly
incurred thereby, take such action and give such information and,
upon reasonable notice, access to relevant personnel, premises,
chattels, documents and records to GEC and its professional advisers
as GEC may reasonably request and the relevant Group Company and/or
the Purchaser and/or the relevant member of the Purchaser's Group
shall take such action and give such information and assistance in
order to avoid, dispute, resist, mitigate, settle, compromise,
defend or appeal any Claim in respect thereof or adjudication with
respect thereto as GEC may reasonably require;
(C) make no admission of liability, agreement, settlement or compromise
with any third party in relation to any such Claim or adjudication
without the prior written consent of GEC (such consent not to be
unreasonably withheld or delayed). If GEC agrees with the third
party to settle or compromise a Claim, and the Purchaser refuses to
agree to such settlement or compromise then, if the amount for which
GEC subsequently becomes liable exceeds the figure at which it would
have so settled or compromised the relevant Claim, GEC shall not be
liable for the excess amount or any costs or liabilities incurred
since the proposed date of settlement or compromise; and
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(D) subject as provided below and without prejudice to the generality of
the foregoing at the request of GEC and subject to GEC indemnifying
the Purchaser and/or the relevant Group Company to their reasonable
satisfaction against any liability, costs, damages or expenses which
may be reasonably incurred thereby, allow GEC to take the sole
conduct of actions under any Environmental Warranty or the
Environmental Undertaking as GEC may deem appropriate in connection
with any such Claim in the name of the Purchaser or the appropriate
member of the Purchaser's Group and in that connection the Purchaser
shall give or cause to be given to GEC all such assistance as GEC
may reasonably require in avoiding, disputing, resisting, settling,
compromising, defending or appealing any such Claim. GEC shall:-
(i) in response to reasonable requests from the Purchaser from
time to time, keep the Purchaser informed of the progress of
such Claim;
(ii) provide the Purchaser with copies of such documentation
relating to such Claim as it may reasonably request; and
(iii) give the Purchaser such opportunities as it may reasonably
request to make representations regarding the conduct of such
Claim
PROVIDED ALWAYS THAT, if GEC wishes to take sole conduct of a Claim
under the Environmental Undertaking the following provisions shall
apply. If the aggregate of all costs, liabilities and expenses
arising out of such Claim (when aggregated with amounts paid or
payable by GEC in respect of prior Claims under the Environmental
Undertaking) (A) is reasonably expected to fall below L10 million,
then GEC shall be entitled to sole conduct of such Claim (subject to
paragraph (C) below); (B) is reasonably expected to exceed L10
million then GEC and the Purchaser shall have joint conduct of such
Claim and (C) was thought to be below L10 million but it becomes
apparent to GEC that it is likely that the aggregate will, in fact,
exceed L10 million then, in cases where GEC has taken sole conduct,
GEC shall promptly notify the Purchaser of the change in position
and the Purchaser shall thenceforth be entitled to assume joint
control of the Claim with GEC. In no event may GEC be required to
indemnify the Purchaser for an amount in respect of Claims under the
Environmental Undertaking in excess of L10 million.
If the Purchaser and GEC fail to agree whether GEC is entitled to
take sole conduct of a Claim, an expert opinion from an independent
environmental consultant of no less than ten years experience in
assessing the cost of environmental liability as to whether the
costs, liabilities and expenses related to any Claim are likely to
exceed L10 million (less any amounts paid or payable by GEC in
respect of prior Claims under the Environmental Undertaking) shall
be obtained whose opinion shall, in the absence of manifest error,
be final. The costs of obtaining such opinion shall be borne
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equally by the parties. A copy of the opinion and any supporting
material shall be available to each party.
(E) The Purchaser undertakes to comply with its common law duties to
mitigate its loss and nothing in this Agreement shall derogate from
that duty.
(F) Notwithstanding the terms of sub-paragraph (B) of this paragraph 4,
GEC may not request the Purchaser to take any action against an
Employee (except where there has been fraud or theft by the
Employee).
5. NO LIABILITY IF LOSS IS OTHERWISE COMPENSATED FOR
(A) General
(i) The Purchaser and those deriving title from the Purchaser on
or after Completion shall not be entitled to recover damages
or otherwise obtain reimbursement or restitution more than
once between them in respect of the same loss caused by a
breach of the Warranties or a claim to which the Environmental
Undertaking applies.
(ii) No liability shall attach to GEC by reason of any breach of
the Warranties if the same loss occasioned to the Purchaser or
the relevant Group Company or a member of the Purchaser's
Group by reason of such breach has been recovered under the
Tax Covenant or the Environmental Undertaking and vice versa.
(iii) The Purchaser shall have no rights or remedy whatsoever in
respect of any fact, matter or circumstance constituting a
breach of Warranty or giving rise to a claim under the
Environmental Undertaking except pursuant to a claim for such
breach under this Agreement, and the Purchaser hereby
irrevocably waives, releases, discharges and acquits GEC from
any other causes of action, known or unknown, and whether
based on statute, regulation or common law, in respect of such
fact, matter or circumstance, and from any claims, demands,
debt, controversies, damages, costs, losses and expenses in
respect thereof except as provided in this Agreement. Neither
the acceptance nor the delivery of this waiver and release
shall be construed as an admission of liability.
(B) Taxation
In calculating the liability of GEC for any breach of the Warranties
or under the Environmental Undertaking there shall be taken into
account the amount by which any Taxation for which the relevant
Group Company is now or in the
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73
future accountable or liable to be assessed is or will be reduced as
a result of the matter giving rise to such liability, provided that
if any amount paid by GEC in respect of any breach of the Warranties
is held by a tax authority to be a taxable receipt of the Purchaser,
then the amount so paid (the "Original Sum") shall (to the extent
that such taxation has not already been taken into account in the
determination of the Original Sum) be increased to the amount which
after subtraction of the amount of tax paid on such increased amount
is equal to the Original Sum.
(C) Insurances
If, in respect of any matter which would give rise to a breach of
the Warranties or a claim under the Environmental Undertaking, the
Purchaser, a member of the Purchaser's Group or a Group Company is
entitled (or would have been so entitled had there been maintained
in force or but for any change in the terms of the policies of
insurance maintained by or on behalf of a Group Company or policies
providing equivalent cover thereto) to claim under any policy of
insurance, then the Purchaser will notify GEC in writing of the
matter giving rise to the claim, in accordance with paragraph 3.2,
but will not pursue the claim against GEC unless and until the
relevant Group Company, the Purchaser or a member of the Purchaser's
Group shall have made a claim against its insurers and undertaken
all reasonable steps to enforce such claim. The amount recovered
from any such insurance claim (or any claim which could have been
made had such policies or their equivalents been maintained as
aforesaid) (less the Purchaser's or the Group Company's reasonable
costs of recovering the same (to the extent directly attributable to
such recovery)) shall then be applied to reduce or extinguish any
such claims for breach of the Warranties or under the Environmental
Undertaking.
(D) Recovery from Third Parties
(i) Subject to and save as provided in paragraph 2(B) of Part B of
Schedule 6, where the Purchaser, a member of the Purchaser's
Group and/or a Group Company are at any time entitled to
recover from some other person any sum in respect of any
matter giving rise to a claim under the Warranties or under
the Environmental Undertaking or under any of the other
provisions of this Agreement, the Purchaser shall, and shall
procure that such Group Company or the relevant member of the
Purchaser's Group shall, provided that GEC shall have given
the Purchaser such indemnities as the Purchaser may reasonably
require in connection therewith, undertake all reasonable
steps to enforce such recovery prior to taking action against
GEC (other than to notify GEC of the claim against GEC) and,
in the event that the Purchaser or such Group Company or
relevant member of the Purchaser's Group recover any amount
from such other person, the amount of the claim against GEC
shall be reduced by the amount
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recovered, less all reasonable costs, charges and expenses
incurred by the Purchaser or such Group Company or relevant
member of the Purchaser's Group recovering that sum from such
other person or if that sum is greater, the claim shall be
extinguished.
(ii) If GEC pays at any time to the Purchaser or the relevant
member of the Purchaser's Group an amount pursuant to a claim
in respect of the Warranties or under the Environmental
Undertaking or under any other provisions of this Agreement
and the Purchaser or relevant member of the Purchaser's Group
subsequently becomes entitled to recover from some other
person any sum in respect of any matter giving rise to such
claim, the Purchaser shall, and shall procure that or the
relevant member of the Purchaser's Group shall, provided that
GEC shall have given the Purchaser such indemnities as the
Purchaser may reasonably require in connection therewith, take
all reasonable steps to enforce such recovery, and shall
forthwith repay to GEC so much of the amount paid by GEC to
the Purchaser or the relevant member of the Purchaser's Group
as does not exceed the sum recovered from such other person
less all reasonable costs, charges and expenses incurred by
the Purchaser or relevant member of the Purchaser's Group
recovering that sum from such other person; and
(iii) If any amount is repaid to GEC by the Purchaser or the
relevant member of the Purchaser's Group pursuant to
sub-paragraph (D)(ii) above, an amount equal to the amount so
repaid shall be deemed never to have been paid by GEC to the
Purchaser for the purposes of paragraph 3.1.
6. ACTS OF THE PURCHASER
No claim shall lie against GEC under the Warranties or the Environmental
Undertaking to the extent that such claim is attributable to:-
(i) any voluntary act, omission, transaction or arrangement carried out
at the written request of or with the written consent of the
Purchaser before Completion;
(ii) any voluntary act, omission, transaction or arrangement which could
reasonably have been avoided, carried out by the Purchaser or on
its behalf or by persons deriving title from the Purchaser on or
after Completion otherwise than in the ordinary course of business
and which the Purchaser knew or ought reasonably to have been aware
could result in a breach of Warranty; or
(iii) any admission of liability made in breach of paragraph 4(C) of this
Schedule after the date hereof by the Purchaser, a Group Company or
a member of the
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Purchaser's Group or on their behalf or by persons
deriving title from the Purchaser on or after Completion.
7. ALLOWANCE, PROVISION OR RESERVE IN THE MANAGEMENT ACCOUNTS
No matter shall be the subject of a claim for breach of any of the
Warranties to the extent that allowance, provision or reserve in respect
of such matter shall have been made in the Management Accounts disclosed
in Disclosure Document 17-116 or has been included in calculating
creditors or deducted in calculating debtors in the said Management
Accounts and (in the case of creditors or debtors) is identified in the
records of the relevant Group Company or shall have been otherwise taken
account of or reflected in the said Management Accounts save that this
paragraph shall not apply to (i) the patent infringement provision
referred to in paragraph 2.1(iv) of the Disclosure Letter or (ii) the
excess rent provision for the Luton property.
8. LEGISLATION
No liability shall arise in respect of any breach of any of the
Warranties or under the Environmental Undertaking if and to the extent
that liability for such breach occurs or is increased wholly or partly as
a result of any legislation not in force at the date hereof or which
takes effect retrospectively PROVIDED THAT for the purposes of
establishing whether any liability has arisen under the Environmental
Warranties or under the Environmental Undertaking the new contaminated
land power introduced by section 57 of the Environmental Act 1995 to the
Environmental Protection Act 1990 and the first set of guidance and
regulations adopted under that power (but no subsequent modifications
thereto) shall be deemed to be in force and any retrospective effect of
such power guidance and regulations shall not be deemed grounds for the
avoidance of liability pursuant to this paragraph 8.
9. TAXATION
GEC shall not be liable in any event in respect of any claim in respect
of any breach of the Warranties:-
(A) to the extent that that claim arises or is increased as a result
only of any increase in rates of Tax or any change in law or
practice or any withdrawal of any extra-statutory concession by a
Tax authority or any change in accountancy practice or principles,
being an increase, withdrawal or change made, in any such case,
after Completion with retrospective effect; or
(B) to the extent that that claim would not have arisen or would have
been reduced but for a failure or omission on the part of the
Purchaser or the relevant Group Company after Completion to make any
election or claim any Relief, the making or claiming of which was
taken into account in computing the provision or reserve for Tax in
the Accounts; or
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(C) the extent that that claim arises by reason of a voluntary
disclaimer by the relevant Group Company after Completion of the
whole or part of any allowance to which it is entitled under Part II
of the Capital Allowances Act 1990 or by reason of the revocation by
the relevant Group Company after Completion of any claim for Relief
made (whether provisionally or otherwise) by it prior to Completion;
or
(D) to the extent that that claim arises as a result of any changes
after Completion in the bases, methods or policies of accounting of
the Purchaser or the relevant Group Company; or
(E) to the extent that any income, profits or gains to which that claim
is attributable were actually earned or received by or actually
accrued to the relevant Group Company but were not reflected in the
Accounts; or
(F) to the extent that that claim arises or is increased as a
consequence of any failure by the Purchaser to comply with any of
its obligations under the Tax Covenant ; or
(G) to the extent that that claim would not have arisen but for a
cessation of, or any change in the nature or conduct of, any trade
carried on by the relevant Group Company, being a cessation or
change occurring on or after Completion.
10. THE PURCHASER'S KNOWLEDGE
GEC shall not be liable under the Warranties to the extent that the
Purchaser or any member of the Purchaser's Group (as the same is
constituted on the date hereof) or any of their respective relevant
employees or agents had knowledge on the date hereof of the matters
forming the basis of the claim.
For the purposes of this paragraph 10, the Purchaser or any member of the
Purchaser's Group at the date hereof or any of their respective employees
or agents shall be deemed to have knowledge of the matters forming the
basis of the relevant claim only if and to the extent that the employees
or agents of the Purchaser or relevant member of the Purchaser's Group
were given access to any document or other source of information which
fairly disclosed such fact or from which such fact was apparent provided
that no person shall be deemed to have knowledge of any matter to the
extent that the person who was given access to the relevant document or
other source of information could not reasonably be considered to be
capable of assessing the significance of such matter.
11. NO LIABILITY FOR CONTINGENT OR NON-QUANTIFIABLE CLAIMS
If any breach of the Warranties or under the Environmental Undertaking
arises by reason of some liability of any member of the Purchaser's Group
or of the Purchaser
<PAGE>
77
or a Group Company which, at the time such breach or claim is
notified to GEC, is contingent only or otherwise not capable of being
quantified, then GEC shall not be under any obligation to make any
payment in respect of such breach or claim unless and until such
liability ceases to be contingent or becomes capable of being quantified,
as the case may be.
12. NO WARRANTIES GIVEN IN RESPECT OF FORECASTS, BUDGETS OR PROJECTIONS, THE
INFORMATION MEMORANDUM, THE KPMG REPORT OR THE DISCLOSURE DOCUMENTS.
The Purchaser acknowledges that no Warranties are given by GEC in respect
of forecasts, budgets or projections or, in respect of any statement
made, information given or opinion expressed in the Information
Memorandum, the KPMG Report or in any Disclosure Document.
13. PAYMENT TO BE ADJUSTMENTS OF PURCHASE PRICE
Subject to clause 9 of this agreement, any payment made by GEC in respect
of any claim under the Warranties or under the Environmental Undertaking
or the Tax Covenant and any payment received by GEC pursuant to this
Agreement shall constitute an adjustment to the Aggregate Purchase Price
payable under clause 3 (Consideration) of this Agreement.
14. FRAUD
For the avoidance of doubt, the provisions of this Schedule shall take
effect subject to the provisions of clause 15.4 of this Agreement.
15. ASIA
Neither GEC nor any member of the GEC Group shall have any liability
whatsoever to the Purchaser under any of the Warranties by reason of any
of the businesses of any Group Company being adversely affected (before
or after the date of this Agreement) by the economic conditions affecting
Asia or any part thereof.
<PAGE>
78
SCHEDULE 5:
PENSION ARRANGEMENTS
PART A - MARCONI (UK)
1. In this Part of this Schedule, the following expressions shall have
the meanings assigned to them below:
"ACTUARY'S LETTER" the letter from SPT to the Purchaser's
Actuary, a copy of which is appended hereto
as Appendix A to this Part of this
Schedule;
"GEC SCHEME" the retirement benefits scheme established
by GEC, and known as "the G.E.C. 1972 Plan"
constituted by a Definitive Trust Deed and
Rules dated 4th March, 1982 as amended;
"INTERIM PERIOD" the period commencing on the day
immediately following Completion and ending
on the day immediately preceding the
Pension Transfer Date;
"PAYMENT DATE" the date falling 6 months after the Pension
Transfer Date or such other date as shall
reasonably be agreed by SPT and the
Purchaser's Actuary;
"PENSIONABLE EARNINGS" has the meaning defined in the rules
governing the GEC Scheme from time to time;
"PENSIONS LEGISLATION" the Pensions Act 1995 and regulations
thereunder made or to be made in the
future;
"PENSION TRANSFER DATE" the date falling six months after
Completion or such earlier date as may be
notified in writing by the Purchaser to
GEC;
"PURCHASER'S ACTUARY" Moray Sharp of Lane, Clark & Peacock or
such other actuary appointed by the
Purchaser and notified in writing to GEC
for the purposes of this Part of this
Schedule;
"SPT" Stanhope Pension Trust Limited, being the
trustee for the time being of the GEC
Scheme;
<PAGE>
79
"TRANSFER AMOUNT" the amount calculated in accordance with
the Actuary's Letter in respect of benefits
prospectively and contingently payable
under the GEC Scheme to and in respect of
the Transferring Members accrued up to the
Pension Transfer Date;
"TRANSFEREE SCHEME" the retirement benefits scheme or schemes
to be established or nominated by the
Purchaser under paragraph 2.1 of this Part
of this Schedule;
"TRANSFERRING EMPLOYEES" those Employees who are members of the GEC
Scheme at the date of this Agreement and
who are eligible to become members of the
Transferee Scheme; and
"TRANSFERRING MEMBERS" those Transferring Employees who join the
Transferee Scheme on the Pension Transfer
Date and who elect that their accrued
rights under the GEC Scheme are transferred
to the Transferee Scheme and who are still
in service with Marconi (UK) at the time of
such election.
2. The Purchaser undertakes to:
2.1 establish or procure the establishment of a retirement benefits
scheme or a personal pension scheme or schemes, by the Pension
Transfer Date, in a form capable of approval by the Board of Inland
Revenue as an exempt approved scheme under Chapter 1 or Chapter IV
of Part XIV of ICTA 1988 or nominate an existing retirement benefits
scheme which is so approved and which is able and willing to accept
a transfer payment from the GEC Scheme in respect of each
Transferring Member in accordance with the provisions of this Part
of this Schedule;
2.2 notify GEC in writing with particulars of the Transferee Scheme; and
2.3 invite the Transferring Employees who remain members of the GEC
Scheme and who have not reached their normal retirement date to
become members of the Transferee Scheme with effect from the Pension
Transfer Date.
3.1 GEC undertakes that it will take all reasonable endeavours (including
obtaining the consent of the Pension Schemes Office of the Inland
Revenue) as are necessary to permit the Transferring Employees and the
Company to continue to participate in the GEC Scheme for all pension and
death in service benefits during the Interim Period as members and
associated employer.
3.2 GEC undertakes to procure that during the Interim Period no amendments
will be made to the GEC Scheme or payment made from the GEC Scheme which
will
<PAGE>
80
adversely affect the Transfer Amount and that any increase in the
rate of contributions to the GEC Scheme shall not apply to the Company or
to any of the Transferring Employees without, in either case, GEC giving
such notice as is reasonably practicable in the circumstances, being at
least two weeks.
3.3 GEC undertakes to procure that the GEC Scheme will not be terminated or
commence to wind-up during the Interim Period without giving such notice
in writing as is reasonably practicable in the circumstances, being at
least two weeks.
4. Marconi (UK) shall cease to participate in the GEC Scheme at the end of
the Interim Period.
5. In respect of the Interim Period, the Purchaser undertakes to GEC (for
itself and as agent for SPT) that:
5.1 Marconi (UK) will pay to SPT contributions to be made by and in
respect of the Transferring Employees at the following rates:-
(a) Marconi (UK) six (6) per cent of Transferring Employees
Pensionable Earnings, or such other rates applicable to
participating employers generally as are in force under the
trust deed and rules governing the GEC Scheme from time to
time; and
(b) for each Transferring Employee, three (3) per cent of his
Pensionable Earnings or such other rates applicable to
participating employees generally as are in force under the
trust deed and rules governing the GEC Scheme from time to
time.
5.2 Marconi (UK) will pay a management charge to the principal company
of the GEC Scheme of 1.6% of Marconi (UK)'s Transferring Employees'
Pensionable Earnings in respect of the whole of the Interim Period;
5.3 the Purchaser will procure that Marconi (UK) complies with the rules
of the GEC Scheme; and
5.4 the Purchaser shall procure that the contributions payable by the
Transferring Employees at the rate prescribed by the rules of the
GEC Scheme shall be deducted from the remuneration of the
Transferring Employees.
Both Marconi (UK) and the Transferring Employees' contributions shall
become due monthly in arrears on pay up to and including the 5th of each
month and shall be paid immediately to SPT.
6. Immediately after the Pension Transfer Date GEC shall use all reasonable
endeavours to procure that SPT shall:
<PAGE>
81
6.1 determine the Transfer Amount (as if for the purposes of this
calculation all the Transferring Employees are Transferring Members)
in accordance with the terms and assumptions set out in the
Actuary's Letter;
6.2 within 2 months of the Pension Transfer Date promptly communicate
the results of its calculations to the Purchaser's Actuary; and
6.3 agree the amount with the Purchaser's Actuary not later than 3
months after the Pension Transfer Date.
7. Subject to the Purchaser complying with its obligations under this Part
of this Schedule and provided that SPT and the Purchaser's Actuary have
agreed the Transfer Amount in accordance with the provisions of
paragraphs 6 and 10 of this Part of this Schedule, GEC shall use all
reasonable endeavours to procure that SPT shall (subject to the approval
of the Board of Inland Revenue) transfer on the Payment Date to the
Transferee Scheme in cash the Transfer Amount in respect of the
Transferring Members from whom SPT has received a completed election form
[substantially in the form of Appendix B to this Part of this Schedule.
8. Subject to the receipt of the Transfer Amount by the Transferee Scheme
the Purchaser will procure that the Transferee Scheme will provide
(subject to Inland Revenue limits not being exceeded) pensions (including
spouses' pensions where applicable) and other benefits for or in respect
of each of the Transferring Members in respect of service prior to the
Pension Transfer Date which are reasonably agreed by the Purchaser's
Actuary and SPT as being no less favourable overall than the benefits for
such service to which the Transferring Members are entitled under the GEC
Scheme on the day before the Pension Transfer Date on the basis of the
actuarial assumptions in Appendix A to this Schedule or if the Transferee
Scheme is a defined contributions scheme that part of the Transfer Amount
which is reasonably agreed by SPT and the Purchaser's Actuary as being
applicable to each Transferring Member shall be credited in full to
provide benefits in respect of service prior to the Pension Transfer Date
for the relevant Transferring Member.
9. If any of the Transferring Members pay additional voluntary contributions
in respect of which the benefits are not related to pensionable service
or final pensionable earnings, the voluntary contributions and the
additional benefits payable as a result shall be disregarded for all the
purposes of this Part of this Schedule. GEC shall use all its reasonable
endeavours to procure that the part of the voluntary contribution fund
attributable to the Transferring Members in accordance with the rules of
the GEC Scheme is transferred to the Transferee Scheme on the Payment
Date.
10. GEC and the Purchaser shall, where there is any dispute between SPT and
the Purchaser's Actuary concerning the determination of the Transfer
Amount or of any other actuarial matters to be determined or agreed by
them for the purposes of this Part of this Schedule, refer the matter to
an independent actuary to be nominated jointly by GEC and the Purchaser
or, failing agreement over the nomination,
<PAGE>
82
nominated by the President for the time being of the Institute of
Actuaries. The person so appointed shall act as an expert and not as
an arbitrator, his decision shall be final and binding and his fees
shall be borne equally by GEC and the Purchaser.
11. Each of SPT and the Purchaser's Actuary may request of each other, of GEC
or of the Purchaser information reasonably necessary for effecting the
transfer arrangements specified under paragraphs 6 to 9 of this Part of
this Schedule, provided such information is within the possession or
control of the party from whom it is requested. GEC or the Purchaser, as
the case may be, shall use its best endeavours to procure that all such
information reasonably requested in writing shall be supplied to the
party requesting it within 14 days of each such request, and shall be
accurate and complete in all material respects.
12. No Employee who is not at Completion a member of the GEC Scheme shall be
entitled under this Part of this Schedule to become a member thereof
after Completion.
13. It is acknowledged that SPT and the trustees of the Transferee Scheme are
not parties to this Agreement and are not bound by the terms hereof.
14. GEC and the Purchaser acknowledge that the Pensions Legislation imposes
requirements and discretions on employers under and in relation to the
GEC Scheme.
14.1 The Purchaser agrees that it will procure that Marconi (UK) will
agree that GEC (or a subsidiary or associated company of GEC
determined, in its absolute discretion, by GEC) may after notifying
Marconi (UK) make all decisions and exercise all discretions in
relation to the GEC Scheme necessary or desirable by or under the
Pensions Legislation.
14.2 While Marconi (UK) remains a participating employer in the GEC
Scheme, the Purchaser shall procure that Marconi (UK) will in
relation to the GEC Scheme:
(A) exercise no right or discretion conferred on it by or under
the Pensions Legislation without the prior written consent of
GEC (such consent not to be unreasonably withheld);
(B) exercise each right or discretion conferred on it by or under
the Pensions Legislation (including, for the avoidance of
doubt, contracting out) as reasonably directed from time to
time in writing by GEC;
(C) co-operate with GEC and SPT in providing information about,
and access to, the Transferring Employees from time to time;
(D) from time to time execute all such deeds, documents,
agreements, consents or approvals for the purpose of complying
with its obligations
<PAGE>
83
under this sub-paragraph as may be reasonably considered
necessary or desirable by GEC; and
(E) if reasonably requested by GEC execute a deed irrevocably
appointing GEC as its attorney to execute (in the name of such
Group Company or otherwise) from time to time any such deeds,
documents, agreements, consents or approvals.
14.3 Without prejudice to the generality of the foregoing, the Purchaser
shall procure that Marconi (UK) will at the request of GEC
irrevocably:
(A) nominate GEC as the "appropriate person" and the person to act
for it for the purposes of sub-section 21(9) of the Pensions
Act 1995 (as to be inserted by paragraph 1(1)(g) of Schedule 3
to the Occupational Pension Schemes (Member-nominated Trustees
and Directors) Regulations 1996) in relation to the GEC
Scheme;
(B) agree that the consultation required by section 35(5)(b) of
the Pensions Act 1995 by SPT with the employer in relation to
the written statement of investment principles may be with GEC
to its exclusion; and
(C) nominate GEC as its representative for the purposes of section
58(4)(a) of the Pensions Act 1995 (as to be amended by
paragraph 2 of Schedule 5 to the Occupational Pension Schemes
(Minimum Funding Requirement and Actuarial Valuations)
Regulations 1996) in relation to the GEC Scheme.
14.4 GEC may exercise the authorities and discretions envisaged by this
paragraph in its absolute unfettered discretion and in its own
interests. GEC owes no duty or responsibility to the Purchaser or
Marconi (UK) in relation to the exercise of the authorities and
discretions envisaged as conferred on GEC by this paragraph.
<PAGE>
84
APPENDIX A
STANHOPE PENSION TRUST LIMITED
Direct dial: (01785) 274730
Our ref: DOC/S/04 (07.05.1997)
- 1998
Dear Sirs
THE G.E.C. 1972 PLAN
Stanhope Pension Trust Limited is the trustee of the G.E.C. 1972 Plan,
comprising The GEC Plan and the Selected Benefit Scheme, the latter being an
arrangement for additional voluntary contributions.
We offer to pay transfer values to the trustees of the Purchaser's Scheme in
respect of those employees who are members of the G.E.C. 1972 Plan.
Transfer values will be calculated as described below, based on benefits accrued
to the date of cessation of pensionable service and adjusted, as appropriate,
for increases to the date of calculation (the "Calculation Date").
THE GEC PLAN
INTEREST
<TABLE>
<CAPTION>
IN DEFERMENT IN POSSESSION
Projected Discounted Net rate Increases Discounted Net rate
at at of at
<S> <C> <C> <C> <C> <C> <C>
"Basis 1" pension 4.0% 9.0% 4.81% 3.5% 8.0% 4.35%
"Basis 2" pension 0.0% 9.0% 9.00% 3.5% 8.0% 4.35%
"Basis 3" pension 8.0% 9.0% 0.93% 3.5% 8.0% 4.35%
</TABLE>
The projection of pensions will be adjusted for the timing of increases.
<PAGE>
85
Pensions which have arisen from transfers into the Plan will be projected at
3.5% and discounted at 9.0% (leading to a net rate of 5.31% per annum) over the
period of deferment.
Benefits which do not attract the normal Plan increases of the lesser of 5% and
the increase in the retail prices index will be valued by allowing for the
appropriate rate of increase in possession.
MORTALITY
In deferment - PA90 tables, rated down two years for both males and
females.
In possession - PA90 tables, rated down two years for both males and
females.
Spouses' pensions - PA90 tables, rated down two years for both males and
females.
OTHER DECREMENTS
Nil.
SPOUSES' BENEFITS
Wives are assumed to be three years younger than their husbands and 90% of
members are assumed to be married.
FURTHER ADJUSTMENT:
The unit liability of all benefits within
the Plan will be increased by a factor of
1.05 if the member is aged less than 55 at
the time of transfer. For members aged
greater than 55, an adjustment will be
calculated according to age, interpolating
between values of 1.05 for members aged 55
and 1.0 for members aged 65.
ADJUSTMENT TO MARKET VALUE:
The actuarial value of the benefits will be adjusted to market value by
multiplying by the following factors:
If age is less than (or : 4.25 divided by the yield on the FTSE
precisely equal to) 55 Actuaries All-Share Index on the first
working day of the month in which the
Calculation Date occurs.
<PAGE>
86
If age is 65 : the lesser of
(i) the value of a unit holding in a 15
year stock with coupon of 8%, payable
annually in arrears valued at the
annualised yield on the FT-Actuaries Fixed
Interest 15 Year Medium Coupon Index on
the first working day of the month in
which the Calculation Date occurs, and
(ii) the value of a unit holding in a 15
year stock with coupon of 3.85%, payable
annually in arrears valued at the
annualised yield on the FT-Actuaries
Index-Linked Over 5 years (5% inflation)
index on the first working day of the
month in which the Calculation Date
occurs.
If age is between 55 and 65 : through linear interpolation, on the first
working day of the month in which the
Calculation Date occurs, according to age,
by reference to the values at ages 55 and
65.
In valuing benefits which are subject to fixed or no increases, (ii) above will
be ignored.
MINIMUM VALUE
The transfer value for any member will be not less than the member's accumulated
contributions to The GEC Plan with credited interest to the Calculation Date.
SELECTED BENEFIT SCHEME (SBS)
The transfer value for each member will be the retirement credits accumulated to
the Calculation Date.
AGGREGATE TRANSFER VALUE
The aggregate transfer value before expenses for each member will be calculated
as the highest value produced under Bases 1, 2 and 3 (as described in the April
1997 edition of The GEC Plan explanatory booklet) and the minimum value referred
to above, together with any SBS retirement credits.
EXPENSES
A deduction for expenses will be made from the total of the aggregate transfer
values on the attached scale.
<PAGE>
87
GUARANTEE OF BASIS
Transfer values are guaranteed for three months from the Calculation Date after
which we would reserve the right to substitute a different basis.
ADJUSTMENT
The total transfer value net of expenses will be subject to interest between
Calculation Date and payment date at Midland Bank base rate.
TRANSFER AGREEMENT
This letter will be subject to the consent of members concerned and to a formal
agreement between the trustees of the respective pension schemes covering:
(i) Quantification of the transfer values.
(ii) Application of the transfer values.
(iii) Assurance regarding solvency of the Purchaser's pension scheme.
Yours faithfully,
Philip E Read
Director
<PAGE>
88
STANHOPE PENSION TRUST LIMITED
EXPENSES ON TRANSFER VALUES PAID AND RECEIVED
<TABLE>
<CAPTION>
GROSS VALUE EXPENSES
L L L L
<S> <C> <C> <C> <C> <C>
0 Up to 20,000 2.50% of gross value
Over 20,000 Up to 50,000 500 plus 2.00% on gross value over 20,000
Over 50,000 Up to 100,000 1,100 plus 1.50% on gross value over 50,000
Over 100,000 Up to 500,000 1,850 plus 1.25% on gross value over 100,000
Over 500,000 Up to 1,000,000 6,850 plus 1.00% on gross value over 500,000
Over 1,000,000 Up to 2,000,000 11,850 plus 0.80% on gross value over 1,000,000
Over 2,000,000 Up to 5,000,000 19,850 plus 0.60% on gross value over 2,000,000
Over 5,000,000 Up to 10,000,000 37,850 plus 0.40% on gross value over 5,000,000
Over 10,000,000 Up to 20,000,000 57,850 plus 0.20% on gross value over 10,000,000
Over 20,000,000 Up to 50,000,000 77,850 plus 0.08% on gross value over 20,000,000
Over 50,000,000 Up to 100,000,000 101,850 plus 0.03% on gross value over 50,000,000
Over 100,000,000 116,850 plus 0.01% on gross value over 100,000,000
</TABLE>
Note 1 For multiple transfers, total expenses will be allocated in the
proportion that each transfer value bears to the aggregate transfer
values.
2 Expenses are deducted from that part of a transfer value not
attributable to member's contributions and the balance of expenses,
if any, from member's contributions including AVCs.
<PAGE>
89
APPENDIX B
----------
FORM OF AGREEMENT AND OPTION
----------------------------
From: [Merge 'NAME']
National Insurance No: [Merge 'NINO']
To: Trustee[s] of the [ Scheme]
and
Stanhope Pension Trust Limited (the Trustee of the G.E.C. 1972 Plan
comprising The GEC Plan and Selected Benefit Scheme)
I refer to the letters from Stanhope Pension Trust Limited dated
[ ] and the [ Scheme] dated
[ ]
PLEASE TICK ONE BOX ONLY TO SPECIFY YOUR REQUIREMENTS, AND SIGN AND DATE THIS
FORM AND ENTER YOUR HOME ADDRESS.
/ / A I request the Trustee of the G.E.C. 1972 Plan ('the Plan') to retain
my rights to benefit under the Plan in respect of pensionable service
to [ ].
/ / B I have become a member of the [ Scheme] and I
require the Trustee of the G.E.C. 1972 Plan ('the Plan') to transfer
the value of all benefits which have accrued to or in respect of me
under the Plan to the Trustee[s] of the
[ Scheme] in accordance with the above
letters.
/ / C I wish to receive a Statement of Entitlement giving the transfer value
available to a Personal Pension Scheme with...........................
......................................................................
......................................................................
......................................................................
(insert name and address of pension provider)
I understand and acknowledge that following the making of a transfer to the
Trustee[s] of the [ Scheme] in accordance with option B
above, neither I nor any person claiming under or in respect of me (whether a
spouse, dependant or otherwise) will have any entitlement under the G.E.C. 1972
Plan.
Signature: Date:
.............................. ................................
<PAGE>
90
Home address:
..................................................................
...............................................................................
......................................... Postcode:
..........................
PLEASE RETURN THIS TO [YOUR PERSONNEL DEPARTMENT] NO LATER THAN
[ ]
Issued by: Special Projects Department
Stanhope Pension Trust Limited
PO Box 20
Lichfield Road
Stafford ST17 4LN
<PAGE>
91
PART B - MARCONI (US)
BENEFITS
1. As of the Completion Date, the Purchaser (or an affiliate thereof) will
extend to active Affected Employees of Marconi (US) benefit plans and
programs comparable to that offered similarly situated employees
presently employed by the Purchaser. For the purposes of this Part B,
"Affected Employee" means individuals who are employees of Marconi (US)
on the Completion Date. The Purchaser shall, as of the Completion Date,
offer to all Affected Employees membership of all the Guarantor's benefit
plans, including, without limitation, medical, health and dental plans.
on terms no less favourable than those generally available to other
members of each such plan .
ACCRUED VACATION
2. The Purchaser shall be responsible for all vacation, holiday, sickness
and personal days accrued by the employees of Marconi (US) as of the
Completion Date.
PARTICIPATION IN BENEFITS PLANS
3. Affected Employees shall be given credit for all service with Marconi
(US) under Purchaser's employee benefit plans and other benefit
arrangements for purposes of determining eligibility to become a
participant (and in the case of any retirement plan their vested
interest) based on their original date of hire with Marconi (US). For
each Affected Employee who was enrolled for group medical and dental
coverage on the Completion Date and who enrols in Purchaser's group
medical plan as of the Completion Date, the Purchaser shall (i) cause to
be waived any pre-existing condition limitation that might otherwise
apply to such Affected Employee and (ii) agrees to recognise (or cause to
be recognised) the dollar amount of all expenses incurred by such
Affected Employees during the calendar year in which the Completion Date
occurs for purposes of satisfying the calendar year deductible and
co-payments limitations in accordance with the terms of the Purchaser's
plan. GEC shall provide the Purchaser with a true and complete listing
of all amounts so expended and such other information as the Purchaser
may require in order properly to administer the provisions of this
Section.
PARTICIPATION IN GEC'S EMPLOYEE PENSION BENEFIT PLANS
4.1 As of the Completion Date, Affected Employees' participation in the
following plans shall terminate:-
GEC-USA Employees' Savings and Investment Plan ("GEC Savings Plan"), and
GEC-USA Employees' Retirement Plan ("GEC Retirement Plan").
<PAGE>
92
Affected Employees shall thereafter be entitled to the benefits which
they have accrued as of the Completion Date, to the extent then vested,
in accordance with the respective terms of such plans. Prior to the
Completion Date, GEC shall take any and all actions necessary to effect
this termination of participation.
4.2 The Purchaser shall pay, or cause Marconi (US) to pay, to the trust which
funds the GEC Savings Plan all contributions required to be paid to such
trust for periods ending prior to or on the Completion Date in order for
the plan to satisfy the requirements of Section 401 of the Internal
Revenue Code of 1986 or otherwise to satisfy the terms of such plan,
including but not limited to employee pre-tax and after-tax
contributions, employer matching contributions, and any other employer
contributions. The Purchaser shall also furnish to GEC or one of its
affiliates after the Completion Date such information from the books and
records of Marconi (US) as may be reasonably requested by GEC or one of
its affiliates with respect to the plans described above.
PARTICIPATION IN GEC'S EMPLOYEE WELFARE BENEFIT PLANS
5. As of the Completion Date, the participation of Affected Employees and
the dependants of any Affected Employee (collectively hereinafter
referred to as "Subsidiary Welfare Participants") in the GEC-USA
Employees' Welfare Benefit Plan ("GEC Welfare Plan") shall terminate
provided that:
5.1 The GEC Welfare Plan shall pay in accordance with the terms of the plan,
claims covered by the plan which are incurred prior to or on the
Completion Date. For this purpose, a life insurance claim is incurred on
the date of death; a long-term disability claim is incurred on the date
the employee's absence from work begins which qualifies the employee to
receive long-term disability benefits; and medical and dental claims are
incurred on the date the services are rendered.
5.2 [clause deleted]
5.3 The Purchaser shall assume and satisfy the obligation of GEC, a direct or
indirect subsidiary of GEC, or the GEC Welfare Plan to offer on or after
the Completion Date continued medical and dental expense coverage with
respect to the Subsidiary Welfare Participants who incur a qualifying
event on or after the Completion Date which is required by Section 4980B
of the Internal Revenue Code of 1986, as amended, or Section 501 of the
Employee Retirement Income Security Act of 197, as amended. All other
liabilities and obligations arising under Code Section 4980B of ERISA
Section 501 shall remain with GEC and the GEC Welfare Plan.
5.4 The Purchaser shall pay, or cause Marconi (US) to pay, all amounts which
are paid by the GEC Welfare Trust under the GEC Flexible Spending Account
Program portion of the GEC Welfare Plan as a reimbursement or payment of
medical, dental and dependent care expenses and for which the GEC Welfare
Trust has not received payment from Marconi (US) as of the Completion
Date.
<PAGE>
93
6. The Purchaser will indemnify and hold harmless GEC and the direct or
indirect subsidiaries of GEC from and against damages, including attorney
fees, arising from the failure of the Purchaser or Marconi (US) to
satisfy the obligations imposed on the Purchaser or Marconi (US) under
this Part of this Schedule. GEC (and each of its affiliates) shall
indemnify and hold Purchaser (and each of its affiliates) harmless from
and against damages, including attorney fees arising from the failure to
satisfy the obligation imposed on GEC (or any affiliate thereof) under
this part of this Schedule.
STATUS OF BENEFIT PLANS
7. A complete and accurate list of all plans, practices and arrangements
that provide retirement, medical, dental, life, accidental death,
dismemberment, severance or long term disability benefits (including any
section 125 plans that provide such benefits) to employees or former
employees which Marconi (US) or any of its subsidiaries maintains or
contributes to, or has any obligation to contribute to, or has or could
incur any liability (whether actual or contingent, directly or
indirectly) ("Benefits Plans")is Disclosure document 17-123. The
Benefits Plans have been administered and maintained in substantial
compliance with all laws, rules and regulations and all reports required
by any governmental agency have been filed. No Benefit Plan is a
"multi-employer plan" within a meaning of Section 3(37) of ERISA.
7.1 No event has occurred or is expected to occur in connection with any
Benefit Plan which could subject the Purchaser (or any affiliate thereof)
to any liability. Except as provided in paragraphs 4.2, 5.3 and 5.4
above, GEC shall retain and satisfy all liabilities, direct or indirect,
known or unknown, actual or contingent, associated with any Benefit
Plan(except for the Marconi (US) Severance Policy) (which shall subject
to paragraph 7.3 below include but shall not be limited to any liability,
other than a liability to Tax, arising from the exclusion of part-time
employees from the profit-sharing (401(k)) plan (the "Profit-Sharing
Plan")), and neither the Purchaser nor any of its affiliates shall have
any obligation or liability whatsoever with regard to any such Benefit
Plan. The provisions of this paragraph 7.1 and paragraph 6 above shall
survive the Completion Date.
7.2 With respect to any Benefit Plan that is subject to the provision of
Title IV of ERISA, (i) no such plan has been terminated so as to result,
directly or indirectly, in any liability, contingent or otherwise, to the
Purchaser (or any affiliate thereof); (ii) no complete or partial
withdrawal has been made which might result in any liability to the
Purchaser (or any affiliate thereof); (iii) no proceeding has been
initiated by any person (including the PBGC) to terminate any such plan;
(iv) no condition or event currently exists or is currently expected to
occur that could result, directly or indirectly, in any liability to the
Purchaser (or any affiliate thereof); (v) if any such plan were to be
terminated or if any person were to withdraw from such plan, neither the
Purchaser nor any of its affiliates would incur, directly or indirectly,
any liability; (vi) no reportable event (as defined in ERISA) has
occurred with respect to any such plan; (vii) no such plan has incurred
any accumulated funding deficiency, whether or
<PAGE>
94
not waived, and no application has been made for waiver; (viii) each
contribution required to be made to each such plan has been made when
due.
7.3 At the request of GEC, and subject to GEC indemnifying the Purchaser
and/or the relevant Group Company to their reasonable satisfaction
against any liabilities, costs, damages or expenses which may be
reasonably and properly incurred thereby, the Purchaser shall allow GEC
to take the sole conduct of any discussions, negotiations or proceedings
with the Internal Revenue Service or any other Government authority or
organisation or court in connection with the exclusion of part-time
employees from the GEC-USA Employees' Savings and Investment Plan and in
that connection the Purchaser shall give or cause to be given to GEC all
such assistance as GEC may reasonably require in connection with settling
or compromising such discussions, negotiations or proceedings.
8. INDEMNITY
8.1 The Purchaser agrees to indemnify GEC, any member of the GEC Group and
the trustee and administrator of any Benefit Plan including, the GEC
Welfare Plan, against any COBRA Liabilities in respect of any Retained
Employees.
8.2 For the purposes of this paragraph 8:
"Retained Employees" means any Affected Employee who elects to continue
with medical, health and dental coverage under the GEC Welfare Plan after
the Completion Date.
"COBRA Liabilities" means all liabilities, losses, costs, damages, claims
or expenses relating to or in connection with the continuing medical,
health and dental coverage under the GEC Welfare Plan, to the extent that
such liabilities, losses, costs, damages, claims or expenses would have
been sustained or borne by the Guarantor or the medical health and dental
plan maintained by the Guarantor if the Retained Employee had in fact
elected to join such plan maintained by the Guarantor immediately after
the Completion Date less the premiums generally payable by similar
members of such plan.
8.3 GEC shall calculate and then agree with the Purchaser (such agreement not
to be unreasonably withheld or delayed) any amount payable under this
paragraph 8. The Purchaser shall furnish to GEC such information as may
be reasonably requested for the purposes of making such a calculation.
<PAGE>
95
SCHEDULE 6:
PART A - REAL PROPERTY UNDERTAKINGS
1.1 GEC shall as soon as is reasonably practicable apply for and use its
reasonable endeavours to obtain the Requisite Consent as soon as
possible.
1.2 The Purchaser shall use its best endeavours to assist and shall procure
that Marconi (UK) assists GEC in obtaining the Requisite Consent and in
particular shall promptly provide all such information as GEC may
reasonably require in relation to the obtaining of such consent and such
other information as the landlord may be entitled to request under the
terms of the lease of the Longacres Property.
1.3 If reasonably required by the landlord the Purchaser will procure that
Marconi (UK) enters into a direct covenant with the landlord to observe
and perform the terms of the lease of the Longacres Property throughout
the remainder of the term and (if the landlord is so entitled) any
statutory extension of it.
1.4 If the landlord is entitled to require additional security in accordance
with the provisions of the lease of the Longacres Property and reasonably
withholds Requisite Consent to the transfer of the Longacres Property to
Marconi (UK) the Purchaser will take an Assurance in its own name of the
Longacres Property or guarantee the obligations of Marconi (UK) under the
lease and will enter into a direct covenant with the landlord to observe
and perform or (as the case may be) guarantee the observance and
performance of the terms of the lease of the Longacres Property
throughout the remainder of the term and (if the landlord is so entitled)
any statutory extension of it.
1.5 If the landlord is entitled to require additional security in accordance
with the provisions of the lease of the Longacres Property and reasonably
withholds Requisite Consent to the transfer of the Longacres property to
Marconi (UK) or the Purchaser or to Marconi (UK) guaranteed by the
Purchaser, GEC shall as soon as reasonably practicable apply for and use
its reasonable endeavours to obtain the Requisite Consent to the grant to
the Purchaser of an underlease of the Longacres Property on the same
terms as the terms of the lease of the Longacres Property and the
Purchaser shall take such an underlease of the Longacres Property within
five days of the grant of the Relevant Consent.
1.6 With effect from the Completion Date GEC will procure that the Longacres
Property is held on trust for Marconi (UK). Marconi (UK) shall on and
from the Completion Date be permitted to enter into occupation of the
Longacres Property as licensee of GEC and shall be entitled to receive
all profit and other income from it.
1.7 The Purchaser shall from the Completion Date until legal completion in
respect of the Longacres Property be responsible for the payment of all
outgoings in respect of the Longacres Property (save that any rent or
sums payable to the landlord shall be paid by the Purchaser to GEC not
less than 4 working days before they are due and GEC
<PAGE>
96
shall promptly pay or procure payment of such sums to the landlord) and
shall procure that Marconi (UK) observes and performs the covenants,
agreements, conditions and stipulations on the part of the lessee to be
performed and observed under the lease of the Longacres Property and
shall indemnify GEC against any losses arising out of any breach of
those obligations.
1.8 If the Requisite Consent has not been obtained within 12 months after the
Completion Date or earlier if the landlord itself shall take proceedings
against GEC alleging a breach of the alienation covenant of the lease of
the Longacres Property then GEC shall at the joint cost of GEC and the
Purchaser make an application to a competent court for a declaration that
the Requisite Consent has been unreasonably withheld.
1.9 Notwithstanding the foregoing the Purchaser may at any time on giving
notice to GEC elect to take an assignment of the lease of the Longacres
Property in respect of which the Requisite Consent has not been obtained
and shall in that case provide to GEC in the Assurance of the Longacres
Property to itself an indemnity against all demands, claims, losses,
damages, costs, expenses and other liabilities whatsoever which may be
suffered or sustained by GEC as owner of the Longacres Property as a
result of such Assurance being completed without the Requisite Consent.
1.10 The Assurance of the Longacres Property shall be completed on whichever
is the latest of:-
(A) the Completion Date;
(B) the date five working days after the Requisite Consent shall have
been obtained; and
(C) where the Requisite Consent has not been obtained, the later of (i)
the date five working days after the Purchaser shall give notice to
GEC of its desire to exercise its rights in relation to the
Longacres Property pursuant to paragraph 1.9 and (ii) the date five
working days after a court or competent jurisdiction has issued a
declaration to the effect that the Requisite Consent has been
unreasonably withheld.
1.11 On legal completion of the Longacres Property GEC will execute an
Assurance of the Longacres Property to Marconi (UK) or to the Purchaser
as the case may be in the form of the Assurance and then the Purchaser
will or procure that Marconi (UK) shall execute the Assurance and deliver
a certified copy thereof to GEC. Marconi (UK) shall accept the title to
the Longacre Property without further enquiry requisition or objection.
1.12 On legal completion of the Longacres Property GEC will deliver to Marconi
(UK) or the Purchaser the title deeds and documents in GEC's possession
relating to the
<PAGE>
97
Longacres Property together with the Requisite Consent duly executed by
the landlord.
1.13 On legal completion of the Longacres Property GEC will assign to Marconi
(UK) or to the Purchaser as the case may be an assignment of the
Contractors' Warranty in the Agreed Form.
2. The Purchaser shall pay to GEC a sum equal to any refund in the overall
business rates paid relating to the Gunnels Wood Properties and the
Longacres Property when it is received by the Purchaser after the
Completion Date for the period from 1st June, 1994 to the Completion
Date.
3.1 GEC shall procure that Picker International Limited ("Picker") vacates
all parts of the Gunnels Wood Properties which it currently occupies on
or before 1 August 1998.
3.2 If GEC is unable to procure that Picker vacate the premises the subject
of its tenancy on or before 1 August 1998 then GEC shall indemnify the
Purchaser and/or Marconi (UK) in full in relation to any costs expenses
or any other liability it incurs in relation to any steps the Purchaser
and/or Marconi (UK) take thereafter in order to terminate Picker's
tenancy and secure vacant possession of the premises the subject of the
said tenancy.
4. GEC undertakes, upon Marconi (UK) vacating the premises at Eaton Green
Road, The Airport, Luton ("the Luton Premises") on or about 25th
December, 1998, pay to the Purchaser by way of adjustment to the
Aggregate Purchase Price an amount equal to any costs, damages, expenses
and liabilities incurred by the Purchaser or Marconi (UK) arising out of
any claim against them by the Council of the Borough of Luton ("the
Council") or their successors in title in relation to
(A) any shortfall between the sum actually paid by Marconi (UK) to the
Council for its use and occupation of the premises for the period
from and including 25 December 1983 to Completion and the sum (if
any) found or held to be due to the Council in respect of rent
reviews during that period; and
(B) a claim by the Council in respect of dilapidations at the Luton
Premises
up to a maximum aggregate amount of L250,000 and PROVIDED THAT (i) the
Purchaser shall procure that GEC shall participate in all negotiations in
respect of such claims for unpaid rent or dilapidations and the Purchaser
further undertakes that it will not agree to settle any such claims
without the prior written consent of GEC (such consent not to be
unreasonably withheld or delayed); and (ii) the Purchaser shall procure
that Marconi UK shall take all reasonable steps to avoid any material
deterioration to the state of repair of the Luton Premises between
Completion and vacation of the Luton Premises and (iii) the Purchaser
shall procure that Marconi UK continues to maintain and repair such
premises on a basis consistent with its practice prior to Completion.
<PAGE>
98
PART B - ENVIRONMENTAL UNDERTAKING
1. GEC undertakes with the Purchaser to keep the Purchaser and Marconi (UK)
fully indemnified against all costs, damages and expenses incurred by the
Purchaser or Marconi (UK) arising directly out of any claim against them
which results directly from the presence or effect of any Dangerous
Substance upon within or below land or water at or originating from the
St. Albans Property.
2. The undertaking in paragraph 1 above shall take effect subject to the
following:
(A) the liability of GEC thereunder shall not in any event exceed L10
million in aggregate and shall be subject to the further limitations
set out in Schedule 4 to this Agreement to the extent stated in
Schedule 4;
(B) without prejudice to paragraph 5(D) of Schedule 4, the Purchaser
shall not be entitled to make or bring any claim against GEC under
the undertaking in paragraph 1 above unless the Purchaser and/or
Marconi (UK) shall have first taken all reasonable steps to recover
any sum due from Bryant Homes Southern Limited or its successors in
title ("Bryant Homes") under paragraph 9.3 of an Agreement for Sale
and Purchase dated 8th August, 1997 between Marconi (UK) (1) and
Bryant Homes (2) being Document 28 in File 36 No. 17 Additional
Documents in the Disclosure Documents and the environmental
indemnity given by Bryant Homes contained in the registered transfer
of the St. Albans Property from Marconi (UK) to Bryant Homes dated
22nd August, 1997 being Disclosure Document 17-42 PROVIDED THAT
the steps required to be taken by the Purchaser and/or Marconi (UK)
to effect recovery from Bryant Homes shall not include the
commencement of insolvency proceedings or the appealing of a
judgment of a Court given in Bryant Homes' favour where Counsel of
at least ten years call and with relevant experience advises that
there is no reasonable prospect of the Purchaser and/or Marconi (UK)
succeeding in such appeal. In the event that the Purchaser and/or
Marconi (UK) recover any amount from Bryant Homes, the amount of
GEC's liability under this undertaking shall be reduced by the
amount recovered;
(C) if GEC takes sole conduct of any action under the Environmental
Undertaking pursuant to paragraph 4(D) of Schedule 4 then the
obligation of the Purchaser and/or Marconi (UK) to take any steps
against Bryant Homes under paragraph 2(B) of Part B of this Schedule
shall no longer apply save that GEC may take such action in the name
and on behalf of Marconi (UK) on the terms of paragraph 4(D) of
Schedule 4; and
(D) (for the avoidance of doubt) any liability of GEC that might subsist
in relation to the subject matter of the undertaking in paragraph 1
under paragraph 9.3 of an Agreement for Sale and Purchase dated 6th
August, 1997 between Marconi (UK) (1) and GEC (2), being Document 23
in File 36 No. 17
<PAGE>
99
Additional Documents in the Disclosure Documents is irrevocably
waived, released, discharged and acquitted by virtue of
paragraph 5(A)(iii) of Schedule 4 of this Agreement.
<PAGE>
100
SCHEDULE 7:
GEC AND MARCONI MARKS
The following provisions shall relate to the use by the Group Companies
of the GEC and Marconi marks.
GEC
1. All use of the GEC mark must cease at Completion.
MARCONI
2. Subject as set out below, all use of the Marconi name must cease at
Completion. In the case of each exception referred to below the Group
Companies shall in any event use all reasonable endeavours to cease all use
of the Marconi marks as soon as reasonably practicable.
CORPORATE NAMES
3. Any Group Company, which includes Marconi as part of its corporate name,
shall change its name to a name which does not include Marconi or any
confusingly similar name at Completion or as soon as possible thereafter
(but in any event within one month following Completion).
BROCHURES AND CATALOGUES
4. No new sales brochures and/or catalogues can be produced using the Marconi
name (whether in electronic or hard copy form). The words "formerly
Marconi Instruments Limited" in a form agreed by the parties prior to
Completion may be included in such new brochures and/or catalogues for a
period of 9 months after Completion.
5. For the existing catalogues/brochures, further deliveries can be taken
(against existing orders) for a period of 3 months after Completion. Such
catalogues/brochures may only be used if stickers are placed on the
catalogues to obliterate any reference to the GEC or Marconi marks. The
Purchaser shall use its reasonable endeavours to ensure that
catalogues/brochures in the possession of overseas distributors are also
blanked out in the same way.
THE DOMAIN NAME
6. The internet domain name for Group Companies shall be changed at Completion
to a name that does not include GEC or Marconi. A technical solution will
be considered to ensure that any enquiries made by third parties by
reference to the existing domain name are diverted to the new domain name
(web site). Consideration will be given to whether the Purchaser is
permitted to use "formerly Marconi Instruments Limited" on the new web
site.
<PAGE>
101
BUILDINGS AND VEHICLES
7. All signage on buildings is to be removed within 9 months of Completion and
all references to the Marconi name on vehicles are to be removed within 1
month of Completion.
SOFTWARE
8. The Group Companies shall use their reasonable endeavours to remove
references to the Marconi mark from software as soon as reasonably
practicable, and in any event within 9 months from Completion.
PRODUCTS
9. No product manufactured after Completion may use the Marconi name after a
period of 9 months from Completion. Stock existing at the date of
Completion may continue to be sold bearing the Marconi name.
<PAGE>
102
SCHEDULE 8:
FN AND FM PATENTS
FRACTIONAL N
United Kingdom GB 2140232
France (EP) 0125790
Germany P 3478780
Italy (EP) 0125790
Netherlands (EP) 0125790
USA 4609881
DC COUPLED FM
United Kingdom GB 2214012B
France (EP) 0322139
Germany P 3850075.2
Italy (EP) 0322139
Japan 63-325728 (pending)
Netherlands (EP) 0322139
USA 4870384
<PAGE>
103
SCHEDULE 9:
TAX COVENANT
The Tax Covenant shall be in the form of the deed prepared by GEC's Solicitors
which has (for the purposes of identification only) already been initialled by
GEC's Solicitors and the Purchaser's Solicitors.
[CIRCULATED SEPARATELY]
<PAGE>
104
SCHEDULE 10:
PART A - BASIC INFORMATION ABOUT THE COMPANIES
1. COMPANY NAME: Marconi Instruments Limited
PLACE OF
INCORPORATION/REGISTRATION: England and Wales
REGISTRATION NUMBER: 317241
DATE OF INCORPORATION: 6th August, 1936
REGISTERED OFFICE: Longacres House
Norton Green Road
Stevenage
Hertfordshire
SG1 2BA
TAX RESIDENCE: United Kingdom
SHARE CAPITAL - AUTHORISED: 5,000,000 ordinary shares of L1
- ISSUED: 700,000 ordinary shares of L1
REGISTERED SHAREHOLDER(S): GEC-Marconi Limited: 699,999
ordinary shares
Associated Electrical Industries
Holdings Limited: 1
ordinary share
BENEFICIAL OWNER(S) OF ISSUED
SHARES: The General Electric Company, p.l.c.
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: Marconi Instruments SA France
Marconi Messtechnik GmbH Germany
Marconi Instrumentos SA Spain
Marconi Instruments International
Limited
Sanders Instruments Limited
W H Sanders (Electronics) Limited
<PAGE>
105
DIRECTORS: Peter John Smith
Andrew Plews Warwick
Dennis John Bradney
Christopher John Purchase
Phillip Michael Drury
Michael John McCreary
Stephen McQuillan
SECRETARY: Dennis John Bradney
<PAGE>
106
2 COMPANY NAME: Marconi Instruments Inc.
PLACE OF
INCORPORATION/REGISTRATION: Delaware, USA
REGISTRATION NUMBER: 727041009
DATE OF INCORPORATION: 9th February, 1987
REGISTERED OFFICE: The Corporation Trust Co.
1209 Orange Street
Wilmington
DE 19801
TAX RESIDENCE: USA
SHARE CAPITAL - AUTHORISED: 10,000 shares of Common Stock, no par
value
- ISSUED: 6000 shares of Common Stock, no par
value
REGISTERED SHAREHOLDER(S): GEC Incorporated
BENEFICIAL OWNER(S) OF ISSUED
SHARES: GEC Incorporated
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: James R Koehn
Peter J Smith
Charles A Banham
Andrew P Warwick
SECRETARY: Charles A Banham
<PAGE>
107
PART B - BASIC INFORMATION ABOUT SUBSIDIARIES OF THE COMPANIES
1 NAME OF SUBSIDIARY: Sanders Instruments Limited
PLACE OF
INCORPORATION/REGISTRATION: England and Wales
REGISTRATION NUMBER: 607978
DATE OF INCORPORATION: 15th July 1958
REGISTERED OFFICE: Longacres House
Norton Green Road
Stevenage
Hertfordshire
SG1 2BA
TAX RESIDENCE: United Kingdom
SHARE CAPITAL - AUTHORISED: 100 ordinary shares of L1
- ISSUED: 2 ordinary shares of L1
REGISTERED SHAREHOLDER(S): Marconi Instruments Limited: 1
ordinary share
Associated Electrical Industries
Holdings Limited: 1 ordinary share
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: Christopher John Purchase
Peter John Smith
Andrew Plews Warwick
SECRETARY: Dennis John Bradney
2 NAME OF SUBSIDIARY: W.H. Sanders (Electronics) Limited
PLACE OF
INCORPORATION/REGISTRATION: England and Wales
REGISTRATION NUMBER: 425854
DATE OF INCORPORATION: 16th December 1946
<PAGE>
108
REGISTERED OFFICE: Longacres House,
Norton Green Road,
Stevenage,
Hertfordshire SG1 2BA
TAX RESIDENCE: United Kingdom
SHARE CAPITAL - AUTHORISED: 350,000 shares of L1
- ISSUED: 225,000 shares of L1
REGISTERED SHAREHOLDER(S): Marconi Instruments Limited: 224,900
shares of L1
Associated Electrical Industries
Holdings Limited: 100 shares of L1
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: P.J. Smith
A.P. Warwick
D.J. Bradney
SECRETARY: D.J. Bradney
3 NAME OF SUBSIDIARY: Marconi Instruments SA
PLACE OF
INCORPORATION/REGISTRATION: France
REGISTRATION NUMBER: R.C.S. EVRY B340588466 (87B00518)
DATE OF INCORPORATION: 26th March 1987
REGISTERED OFFICE: 18 rue du Plessis-Briard
Courcouronnes
91023 EVRY CEDEX
TAX RESIDENCE: France
SHARE CAPITAL - AUTHORISED: 600,000 shares
<PAGE>
109
- ISSUED: 600,000 shares
REGISTERED SHAREHOLDER AND
OWNER(S) OF ISSUED SHARES: Marconi Instruments Limited
599,994 shares
Peter Smith 1 share
Dennis Bradney 1 share
Jean Chrisp 1 share
Andrew Warwick 1 share
Frank Mauritz 1 share
Christopher Purchase 1 share
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: Andrew Warwick
Peter Smith
Frank Mauritz
Noor Hussain
SECRETARY: (None officially appointed)
4 NAME OF SUBSIDIARY: Marconi Instruments International
Limited
PLACE OF
INCORPORATION/REGISTRATION: England and Wales
REGISTRATION NUMBER: 934595
DATE OF INCORPORATION: 27th June 1968
REGISTERED OFFICE: Longacres House
Norton Green Road
Stevenage
Hertfordshire
SG1 2BA
TAX RESIDENCE: United Kingdom
SHARE CAPITAL - AUTHORISED: 100 ordinary shares of L1
<PAGE>
110
- ISSUED: 100 ordinary shares of L1
REGISTERED SHAREHOLDER(S): Marconi Instruments Limited 99 ordinary
shares
Associated Electrical
Industries Holdings Limited 1 ordinary
share
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: Dennis John Bradney
Peter John Smith
Andrew Plews Warwick
SECRETARY: Dennis John Bradney
5 NAME OF SUBSIDIARY: Marconi Instrumentos SA
PLACE OF
INCORPORATION/REGISTRATION: Spain
REGISTRATION NUMBER: Madrid Commercial Registry, Folder
7619, Book O, Section 8, Sheet No. M-
123230
DATE OF INCORPORATION: 28th February 1986
REGISTERED OFFICE: Calle Rozabella 6, 28230 Las Rozas,
Madrid
TAX RESIDENCE: Spain
SHARE CAPITAL - AUTHORISED: 40,000 shares of Pts 1,000
- ISSUED: 40,000 Shares of Pts 1,000. On those
shares issued under numbers 3-40,000
(inclusive), only 250 Pts per share has
been called up and the balance is to be
paid (under the company's Memorandum
and Articles of Association) not later
than 1st February 1999.
<PAGE>
111
REGISTERED SHAREHOLDER(S): Marconi Instruments Limited
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: Agustin Redondo Sanz
SECRETARY: Maria Jose Aguirre
6 NAME OF SUBSIDIARY: Marconi Messtechnik GmbH
PLACE OF
INCORPORATION/REGISTRATION: Germany
COMMERCIAL REGISTER OF THE COURT
OF MUNICH HRB 6186
DATE OF INCORPORATION: 24th May 1963
SEAT: Germering
TAX RESIDENCE: Germany
AMOUNT OF PAID UP SHARE CAPITAL: DM 3,000,000
REGISTERED SHAREHOLDER(S): Marconi Instruments Limited
BENEFICIAL OWNER(S) OF ISSUED
SHARES: Marconi Instruments Limited
SUBSIDIARIES OR SUBSIDIARY
UNDERTAKINGS: None
DIRECTORS: Peter J. Smith (Geschaftsfuhrer)
Frank Mauritz (Geschaftsfuhrer)
Noor Hussain (Prokurist)
Erich Baumgartner (Prokurist)
Andrew P. Warwick (Prokurist)
SECRETARY: None
<PAGE>
112
SCHEDULE 11:
IMMOVABLE PROPERTY OWNED BY THE MEMBERS OF THE GROUP
A. ENGLAND AND WALES
FREEHOLD PROPERTIES WITH REGISTERED TITLES
<TABLE>
<CAPTION>
Registered proprietor Title number Nature of title Short description
--------------------- ------------ --------------- -----------------
<S> <C> <C> <C>
Marconi Instruments Limited HD296865 Title Absolute Freehold land on the North East Side of Gunnels Wood
Road, Stevenage (known as the Gunnels Wood Building
and the Six Hills Way Building)
Marconi Instruments Limited HD165022 Title Absolute Land and buildings on the North East side of Gunnels
Wood Road, Stevenage (also known as the Sanders
Building and the Design Centre)
</TABLE>
LEASEHOLD PROPERTIES WITH REGISTERED TITLES
<TABLE>
<CAPTION>
Registered proprietor Title Nature of Parties Date of Current Short description
--------------------- number title and ------- expiry rental -----------------
------ Date of ------- -------
lease
---------
<S> <C> <C> <C> <C> <C> <C>
The General Electric HD332735 Title Frogmore 24th L347,700 Longacres House (formerly Imperial
Company, p.l.c. absolute Investments March p.a. House), Norton Green Road, Stevenage,
14th Limited (1) The 2020 Hertfordshire
February General
1995 Electric
Company, p.l.c.
(2)
</TABLE>
<PAGE>
113
LEASEHOLD PROPERTIES WITH UNREGISTERED TITLES
<TABLE>
<CAPTION>
Lessee Title number Date of Parties Date of Expiry Current rental Short description
------ ------------ Lease ------- -------------- -------------- -----------------
-------
<S> <C> <C> <C> <C> <C> <C>
The General [In the course 18th Frogmore 24th March 2030 Peppercorn Additional parking area
Electric Company of registration August Investments Longacres House (formerly
plc (freehold title 1997 Limited (1) Imperial House), Norton
no. 110334157)] The General Green Road, Stevenage,
Electric Hertfordshire.
Company (2)
</TABLE>
<PAGE>
114
<TABLE>
<CAPTION>
Lessee Date of Lease Parties Date of Expiry Current rental Short description
------ ------------- ------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Marconi Instruments Lease not The Council of 24th December, L28,000 p.a. Ground Part 1st, 2nd Floors of
Limited completed, the Borough of 1998 Eaton Green Road, The Airport,
although Luton (1) Luton, Beds., LU2 9NS (19,404
heads of Marconi sq. ft.)
terms agreed Instruments
on 25th Limited (2)
December,
1978
Marconi Instruments There is no The Council of L10,672 p.a. Part 1st Floor of Eaton Green
Limited lease but the Borough of Road, The Airport, Luton, Beds.,
Marconi took Luton (1) LU2 9NS (6,468 sq. ft.)
the space on Marconi
1st April, Instruments
1988 Limited (2)
Marconi Instruments MI took the The Council of Informal L12,936 p.a. Part 2nd Floor of Eaton Green
Limited space on 1st the Borough of agreement Road, The Airport, Luton, Beds.,
January, 1995 Luton (1) expires on LU2 9NS (6,468 sq. ft.)
under an Marconi 25th December,
informal Instruments 1998
agreement Limited (2)
</TABLE>
<PAGE>
115
B. SCOTLAND
LEASEHOLD PROPERTY
<TABLE>
<CAPTION>
Present lessee Date of lease Parties Unexpired Current rental Short description
-------------- ------------- ------- term -------------- -----------------
---------
<S> <C> <C> <C> <C> <C>
Marconi Instruments Registered in Fife Council (1) 23 years L40,000 Lease of ground and buildings
Limited Books of Council Marconi Instruments thereon known as Unit AF20
and Session 9th Limited (2) Donibristle Industrial Estate
December 1997.
Registered in the
Land Registry of
Scotland under
title number
FFE022829
</TABLE>
<PAGE>
116
C. OVERSEAS PROPERTY
LEASEHOLD PROPERTIES
<TABLE>
<CAPTION>
Country Date of Lease Parties Term of Lease Current Rental Short Description
- ------- ------------- ------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
USA 4th October, 1996 Hillwood 2470 120 months Month Suite 100, Forth Worth, Texas -
Limited (1) Marconi commencing on 1-12 $157,524 p.a. 15,784 square feet of office space
Instruments Inc. (2) 15th April 1997 13-36 $173,308 p.a.
37-60 $194,932 p.a.
61-84 $203,140 p.a.
85-120 $207,086 p.a.
USA 26th June, 1997 Haber Associates (1) One year $5,160 plus tax Unit B, 4155 Dow Road, W.
Marconi Instruments commencing 1st Melbourne, Florida 32934
Inc. (2) July, 1997
Germany Keithley Instruments Commenced 1st DM 29k per month (plus 1100 sq. m. office space and 380
GmbH, Munchen, April 1991. ancillary costs advance) sq. m. warehouse, 27 parking lots
Germany (1) Marconi Expires 31st in Germering, Germany
GmbH, Germering (2) March, 2001;
prolonged by
another year
unless
terminated
giving 12
months' advance
notice
<PAGE>
117
Germany 10th March 1989 Gerhard Sommereisen, Expires on 3 DM 5,800 per month 450 sq. m. office space in
Bergkirchen, Germany months' notice (apparently including Gunding-Bergkirchen , Germany
(1) to 31st ancillary costs advance;
March/31st copy not fully readable)
Baumgartner September
Pruftechnik, Dachau,
Germany (2) monthly payable
Germany 29th August 1996; Marconi Messtechnik 1st October DM 3,150 per month. 134 sq. m. office and warehouse
GmbH, Germering, 1996 to 31st (excluding ancillary space; two parking lots in the
Germany (1) I.V.G. September, costs advance) underground car park at Robert-
Immobilien- 1999; DM 3,900 per month, Bosch-Str. 32, 63303 Dreieich,
Verwaltungsgesellsch (including ancillary Germany
aft mbH & Co. costs advance)
Verwaltungs- und
Gewerbebau KG,
Dreieich-
Sprendlingen,
Germany (2)
Germany Marconi GmbH, 1st February DM 4,200 per month 170 sq. m. office and warehouse
Germering, Germany 1993 to 31st (excluding ancillary space, 6 parking lots in
(1) Wicona January 1998 costs advance) Germering, Germany
Deutschland unless prolonged by
GmbH, Viernheim, another year
Germany (2) terminated
giving 12 DM 4,800 per month
months' advance (including ancillary
notice costs advance);
<PAGE>
118
Germany 1 December 1994 Marconi GmbH, 1st December DM 1,700 per month 70 sq m. office and warehouse
Germering, Germany 1994 to 31st space, 2 parking lots
(1) January 1998
ESCO, Ernst Schonau prolonged by
jr. GmbH & Co., another year
Ditzingen, Germany unless
(2) terminated
giving 12
months' advance
notice
France 26th September, Selectinvest 6 (1) 9 years from 470k FF p.a. 18 Rue du Plessrs Briard, "Le
1996 Marconi Instruments 1st January, Canal", (91023) Evry
S.A. (2) 1997
France 22nd November, LA S.C.I. PACE (1) 9 years from 345k FF p.a. 69 sq. m. of office space of
1995 Marconi Instruments 1st December, Building E, 3 Avenue Des
S.A. (2) 1995 Peupliers, Commune de Cesson
Sevigne (35510)
France 30th May, 1997 SCI Cosmo Toulouse 9 years from 11.2k FF p.a. 28 sq. m. of 4th floor offices and
(1) Marconi 1st June, 1997 one outside parking space at
Instruments S.A. (2) Immeuble Burolines, 2 bis, Rue
Marcel Doret, 31700 Blagnac
<PAGE>
119
Spain 24th November, Construcciones Commenced 1st 5,000,000 ptas p.a. 323 sq. m. of office space
1994 Hispano Argentinas March, 1995
(1) Marconi until 1st
Instrumentos S.A. March 1998
(2)
Netherlands 23rd August, 1989 Van der Weegen Annual to 28th Currently G4324 per 200 sq. m.
Beleggings en February. month
Exploitatie ma Termination
atschappij B.V. (1) subject to 6
Marconi Instruments months' notice
Ltd (2) before this
date
Hong Kong 29th January, Dora Wu Chung Lin 24th October, KH$ 31,467 1,234 sq. ft. - Rooms 702-703 on
1997 and David Wue Ta 1996 to 23rd the 7th floor of CC WV Building
Kwin (1) Marconi October, 1999
Instruments Ltd (2)
Hong Kong 1st April, 1997 Chow Kwong Chuen (1) 12th May, 1997 HK$ 37,000 per month Flat P, 7/F, Tower 12 Braemar Hill
(offer to lease Marconi Instruments to 31st May, Road
only) Ltd (2) 1999
<PAGE>
120
Shanghai 20th October, Waiwell Shipping 20th October, US$ 1,862.40 per month 97.19 sq. m.
1997 Ltd. and Marconi 1997 to 19th
Instruments October, 1999
International Ltd.
Beijing Informal arrangements currently exist with Wogen Quangzhou Technology Ltd. until new or transferred leases
are agreed in these areas.
Singapore As set forth in Disclosure Document 17-117
</TABLE>
<PAGE>
121
SCHEDULE 12:
PRE SALE REORGANISATION
1. DIVIDENDS PAID CURRENCY L000
-------------- -------- ----
By Marconi Instrumentos S.A., Spain to ESP 75,600,000 301
Marconi (UK) - paid on 22 January 1998
By Marconi Instruments S.A., France to FRF 13,680,000 1,382
Marconi (UK) - paid on 20 January 1998
By Marconi (UK) to GEC Marconi Ltd - paid L23,000,000 23,000
on 30 January 1998
2. PREPAYMENTS OF NON-TRADING LOAN ACCOUNTS OUTSIDE MI GROUP
---------------------------------------------------------
By Marconi (UK) to GEC Marconi Ltd. - L4,994,349.33 4,994
paid on 30 January 1998
By Marconi (UK) to English Electric L287,500.00 288
Limited - paid on 30 January 1998
3. TAXATION
--------
Surrender to GEC Inc. by Marconi (US) of US$1,429,108 869
tax losses to 31 March 1997 for nil
consideration on 30 January 1998
Tax paid 1.1.98 by GEC on behalf of L1,024,359.19 1,024
Marconi (UK) and surrendered by GEC -
paid on 30 January 1998
4. SHARE CAPITAL INCREASE
----------------------
Issue by Marconi(UK) of 200,000 Ordinary L22,000,000 22,000
Shares of L1 each to GEC Marconi Ltd.
paid in cash on 30 January 1998
<PAGE>
122
5. REORGANISATION
--------------
(A) Purchase by Marconi (UK) of all the L2.00
issued shares of Sanders Instruments
Ltd. from GEC
(B) Transfer of beneficial ownership of
entire issued share capital of
Marconi (UK) to GEC from GEC -
Marconi Ltd effected on 2 February
1998.
All currencies converted to sterling at Closing exchange rates on 31 December
1997 of:-
L1 = ESP 250.78
L1 = FRF 9.8985
L1 = US$ 1.6454
L1 = DEM 2.9585
<PAGE>
123
SIGNED by )
)
for and on behalf of )
THE GENERAL ELECTRIC )
COMPANY, p.l.c. )
in the presence of:- )
SIGNED by )
)
for and on behalf of )
IFR SYSTEMS LIMITED )
in the presence of:- )
SIGNED by )
)
for and on behalf of )
IFR SYSTEMS INC. )
in the presence of:- )
<PAGE>
DATED February, 1998
THE GENERAL ELECTRIC COMPANY, p.l.c.
and
IFR SYSTEMS LIMITED
and
IFR SYSTEMS INC.
--------------------------------------------------
SHARE SALE AND PURCHASE AGREEMENT
in respect of
the Marconi Instruments Group
--------------------------------------------------
Slaughter and May
35 Basinghall Street
London EC2V 5DB
(FM/MVC)
<PAGE>
CONTENTS
PAGE
----
1. Interpretation 1
2. Sale and Purchase of the Shares 1
3. Consideration 2
4. Completion 2
5. GEC's Warranties and Undertakings 2
6. Purchaser's and Guarantor's Warranties and Undertakings 8
7. Purchaser's Remedies and GEC's Limitations on Liability 13
8. Guarantee 13
9. Patent Matters 15
10. Pension Arrangements 21
11. Real Property and Environmental Undertakings 21
12. Remedies and Waivers 21
13. Assignment 22
14. Further Assurance 23
15. Entire Agreement 24
16. Notices 24
17. Announcements 26
18. Restrictive Trade Practices Act 1976 27
19. Costs and Expenses 27
20. Counterparts 27
21. Time of Essence 27
22. Effect of Completion 27
23. Invalidity 28
<PAGE>
24. Governing Law 28
25. Jurisdiction 28
26. Agent for Service 28
SCHEDULE 1: DEFINITIONS 30
SCHEDULE 2: COMPLETION ARRANGEMENTS 39
SCHEDULE 3: THE WARRANTIES 42
SCHEDULE 4: LIMITATIONS ON GEC'S LIABILITY UNDER THE WARRANTIES 68
SCHEDULE 5: PENSION ARRANGEMENTS 78
SCHEDULE 6: PART A - REAL PROPERTY UNDERTAKINGS 95
PART B - ENVIRONMENTAL UNDERTAKING 98
SCHEDULE 7: GEC AND MARCONI MARKS 100
SCHEDULE 8: FN AND FM PATENTS 102
SCHEDULE 9: TAX COVENANT 103
SCHEDULE 10: PART A - BASIC INFORMATION ABOUT THE COMPANIES 104
PART B - BASIC INFORMATION ABOUT SUBSIDIARIES OF THE
COMPANIES 107
SCHEDULE 11: IMMOVABLE PROPERTY OWNED BY THE MEMBERS OF THE
GROUP 112
SCHEDULE 12: PRE SALE REORGANISATION 121
<PAGE>
EXHIBIT 2.02
THIS DEED OF TAX COVENANT is made on the day of February, 1998
BETWEEN:-
(1) THE GENERAL ELECTRIC COMPANY, p.l.c.(registered in England No. 67307),
having its registered office at 1 Stanhope Gate, London W1A 1EH (the
"Covenantor"); and
(2) IFR SYSTEMS LIMITED (registered in England No. 3491978), having its
registered office at 61, Brook Street, London W1Y 2BL (the "Purchaser").
NOW THIS DEED WITNESSES as follows:-
1. INTERPRETATION
In this deed of covenant:-
(i) the following expressions shall have the following meanings:-
"ACCOUNTS" means, in relation to each Group
Company, its audited balance sheet drawn
up as at the Accounts Date;
"ACCOUNTS DATE" means 31st March, 1997;
"AGREEMENT" means the agreement for the sale and
purchase of the Shares (as therein
defined) made between the Covenantor and
the Purchaser;
"BUSINESS DAY" means a day (other than a Saturday or a
Sunday) on which banks are open for
business in London;
"CLAIM" means the issue of any notice, letter or
other document by or on behalf of any
Tax Authority or the taking of any other
action by or on behalf of any Tax
Authority from which notice, letter,
document or action it appears either
that a Tax Liability is to be imposed on
a Group Company or, in the context of
CLAUSE 15 (Counter Covenant), that a
liability or increased liability to Tax
is to be imposed on the Covenantor
and/or any of its subsidiaries;
"COMPLETION" means completion of the sale and
purchase of the Shares under the
Agreement;
<PAGE>
2
"COVENANTOR'S GROUP" means The General Electric Company,
p.l.c. and all its subsidiaries or
subsidiary undertakings from time to
time other than the Group Companies;
"DEEMED TAX LIABILITY" has the meaning given in
paragraph (ii)(b);
"DEFAULT RATE" means 2 per cent. above the base rate
from time to time of National
Westminster Bank plc;
"DISCLOSURE LETTER" has the meaning given to it in the
Agreement;
"DISPOSAL LIABILITY" has the meaning given to it in CLAUSE 2
(Covenant);
"DISTRIBUTION" has the meaning given in
paragraph (iii)(c);
"EVENT" means any transaction, action or
omission, any change in the residence of
any person for the purposes of any Tax,
the death of any person, and a failure
to take any action which would avoid an
apportionment or deemed distribution of
income (regardless of whether the taking
of any such action after Completion
could have avoided such apportionment or
deemed distribution) and shall also
include Completion and (for the
avoidance of doubt) any Distribution and
any Group Company ceasing to be a member
of the Covenantor's Group;
"GROUP COMPANY" has the meaning given to it in the
Agreement;
"GROUP RELIEF" means any loss, allowance or other
amount eligible for surrender by way of
group relief in accordance with the
provisions contained in sections 402
to 413 ICTA and any advance corporation
tax eligible for surrender in accordance
with section 240 ICTA;
"ICTA" means the Income and Corporation Taxes
Act 1988;
"IFR GROUP" has the meaning given to it in the
Agreement;
"INCOME, PROFITS OR GAINS" has the meaning given in
PARAGRAPH (iii)(a);
<PAGE>
3
"MARCONI (UK)" means Marconi Instruments Limited,
registered in England No. 317241 and
having its registered office at
Longacres House, Norton Green Road,
Stevenage, Hertfordshire SG1 2BA;
"MARCONI (US)" means Marconi Instruments Inc.,
registered in Delaware, USA No.
727041009 and having its registered
office at The Corporation Trust Co.,
1209 Orange Street, Wilmington DE 19801;
"MII" means Marconi Instruments International
Limited, registered in England No 934595
and having its registered office at
Longacres House, Norton Green Road,
Stevenage, Hertfordshire SG1 2BA;
"PROCEEDINGS" means any proceeding, suit or action
arising out of or in connection with
this deed;
"RELIEF" means any relief, allowance, exemption
or credit in respect of any Tax or any
deduction in computing Income, Profits
or Gains for the purposes of any Tax;
"SANDERS INSTRUMENTS" means Sanders Instruments Limited,
registered in England No 607978 and
having its registered office at
Longacres House, Norton Green Road,
Stevenage, Hertfordshire SG1 2BA;
"SHARES" has the meaning given to it in the
Agreement;
"TAX" includes:-
(a) within the United Kingdom,
corporation tax, advance
corporation tax, income tax
(including income tax required to
be deducted or withheld from or
accounted for in respect of any
payment), capital gains tax,
capital transfer tax, inheritance
tax, value added tax, national
insurance contributions, stamp duty
reserve tax, duties of customs and
excise, any liability arising under
section 419 or 601 ICTA or Schedule
9A VATA, and any other taxes,
levies, duties, charges, imposts or
withholdings
<PAGE>
4
corresponding to, similar to,
replaced by or replacing any of
them, together with all penalties,
charges and interest relating to any
of them; and
(b) outside the United Kingdom, all
taxes, levies, duties, imposts,
charges and withholdings of any
nature whatsoever, including
(without limitation) taxes on gross
or net Income, Profits or Gains and
taxes on receipts, sales, use,
occupation, franchise, value added
and personal property, together
with all penalties, charges and
interest relating to any of them,
regardless (in either case) of whether
any such taxes, levies, duties, imposts,
charges, withholdings, penalties and
interest are chargeable directly or
primarily against or attributable
directly or primarily to a Group Company
or any other person and of whether any
amount in respect of any of them is
recoverable from any other person as
mentioned in CLAUSE 10 (Recovery from
Other Persons);
"TAX ASSESSMENT" means any assessment, demand or other
similar formal notice of a Tax Liability
issued by or on behalf of any Tax
Authority by virtue of which a Group
Company or, in the context of CLAUSE 15
(Counter Covenant), the Covenantor or
any of its subsidiaries, either is
liable to make a payment of Tax or will,
with the passing of time, become so
liable (in the absence of any successful
application to postpone any such
payment);
<PAGE>
5
"TAX ASSET" means any net operating loss, net
capital loss, investment tax credit,
foreign tax credit, charitable deduction
or any other credit or Tax attribute
which could reduce Taxes (including,
without limitation, deductions and
credits relating to alternative minimum
Taxes), provided however that this term
shall not include the Tax basis of the
shares or assets of Marconi (US);
"TAX AUTHORITY" means any taxing or other authority
(whether within or outside the United
Kingdom) competent to impose any Tax
Liability;
"TAX LIABILITY" has the meaning given in
PARAGRAPH (ii)(a);
"VAT GROUP" means the group of companies of which
for the purposes of section 43 VATA 1994
(a) Marconi (UK) began to be treated as
a member on 1st April 1973 and Marconi
Instruments and Sanders Instruments
began to be treated as members on 1st
May 1996, and (b) the representative
member is the Covenantor;
"VATA" means the Value Added Tax Act 1994; and
"WORKING HOURS" means 9.30 a.m. to 5.30 p.m. on a
Business Day;
(ii) (a) references to any "TAX LIABILITY" of a Group Company shall
mean both liabilities of that Group Company to make actual
payments of Tax (or amounts in respect of Tax), regardless of
whether any such liability shall have been discharged in whole
or in part on or before Completion save to the extent such
discharge is taken into account in the Accounts, and also:-
(1) the loss of a right to repayment of Tax which has been
treated as an asset of the relevant Group Company in
preparing the Accounts or the setting off of any such
right to repayment of Tax against any actual Tax
Liability in respect of which the Purchaser would, but
for that setting off, have been able to make a claim
against the Covenantor under this deed;
(2) the setting off against Income, Profits or Gains which
were earned, accrued or received on or before Completion
or in respect of a period ended on or before Completion
or against
<PAGE>
6
any Tax otherwise chargeable in respect of an
Event occurring (or deemed to occur) on or before
Completion or in respect of a period ended on or before
Completion of any Relief (a "Post-Completion Relief")
which arises as a consequence of or by reference to an
Event occurring (or deemed to occur) after Completion or
in respect of a period commencing after Completion and
not as a consequence of or by reference to any Event
occurring (or deemed to occur) on or before Completion
or in respect of a period ended on or before Completion
in circumstances where, but for such setting off, a
Group Company would have had an actual Tax Liability in
respect of which the Purchaser would have been able to
make a claim against the Covenantor under this deed; and
(3) the unavailability of all or any part of a Relief which
has been taken into account in computing (and so
reducing) any provision for deferred Tax which appears
in the Accounts or the setting off of any such Relief
against any actual liability to Tax in respect of which
the Purchaser would, but for that setting off, have been
able to make a claim against the Covenantor under CLAUSE
2 (Covenant); and
(b) in any case falling within either of SUB-PARAGRAPHS (a)(1),
(a)(2) OR (a)(3) OF THIS PARAGRAPH, the amount that is to be
treated for the purposes of this deed as a Tax Liability of
the relevant Group Company (the "DEEMED TAX LIABILITY") shall
be determined as follows:-
(1) in a case which falls within SUB-PARAGRAPH (a)(1) OF
THIS PARAGRAPH, the Deemed Tax Liability shall be the
amount of the repayment that would have been obtained
but for the loss or setting off mentioned in that
sub-paragraph;
(2) in a case which falls within SUB-PARAGRAPH (a)(2) OR
(a)(3) OF THIS PARAGRAPH and where the Relief was a
deduction from or offset against Tax, the Deemed Tax
Liability shall be the amount of that Relief;
(3) in a case which falls within SUB-PARAGRAPH (a)(2) OF
THIS PARAGRAPH and where the Relief was a deduction from
or offset against Income, Profits or Gains, the Deemed
Tax Liability shall be the amount of Tax which has been
saved in consequence of the setting off; and
(4) in a case which falls within SUB-PARAGRAPH (a)(3) of
this paragraph and where the Relief was a deduction from
or offset against Income, Profits or Gains, the Deemed
Tax Liability shall
<PAGE>
7
be the amount of Tax which would had
been saved had the Relief been available;
(iii) references to:-
(a) "INCOME, PROFITS OR GAINS" shall include development value
and any other standard or measure for the purposes of any
Tax and shall also include any income, profits or gains
which are deemed to be earned, accrued or received for the
purposes of any Tax;
(b) Income, Profits or Gains (as defined in SUB-PARAGRAPH (a) OF
THIS PARAGRAPH) as being earned, accrued or received on or
before a particular date or in respect of a particular
period shall mean Income, Profits or Gains which are
regarded as having been, or are deemed to have been, earned,
accrued or received on or before that date or in respect of
that period for the purposes of any Tax;
(c) any "DISTRIBUTION" shall include anything which is, or is
deemed to be, a dividend or distribution for the purposes of
any Tax and shall also include any other Event which gives
rise to an obligation to account for advance corporation tax
or amounts corresponding to or similar to advance
corporation tax;
(d) any Distribution as occurring on or before a particular date
shall include any Distribution which has fallen due to be
made on or before that date for the purposes of any Tax; and
(e) any "SUBSIDIARY OF THE COVENANTOR" shall mean any company of
which the Covenantor has control for the purposes of
section 416 ICTA; and
(iv) unless otherwise specified:-
(a) references to clauses, sub-clauses, paragraphs,
sub-paragraphs and the schedules are to clauses,
sub-clauses, paragraphs, sub-paragraphs of, and the
schedules to, this deed;
(b) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or
may from time to time be, amended, modified or re-enacted;
(c) references to a "PERSON" shall be construed so as to include
any individual, firm, company, government, state or agency
of a state or any joint venture, association or partnership
(whether or not having separate legal personality);
<PAGE>
8
(d) references to a "COMPANY" shall be construed so as to
include any company, corporation or other body corporate,
wherever and however incorporated or established;
(e) the expression "BODY CORPORATE" shall have the meaning given
in the Companies Act 1985;
(f) references to writing shall include any modes of reproducing
words in a legible and non-transitory form;
(g) references to times of the day are to London (United
Kingdom) time;
(h) headings to clauses and the schedule are for convenience
only and do not affect the interpretation of this deed;
(i) references to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status,
court, official, or any legal concept or thing shall in
respect of any jurisdiction other than England be deemed to
include what most nearly approximates in that jurisdiction
to the English legal term; and
(j) (1) the rule known as the ejusdem generis rule shall not
apply and accordingly general words introduced by the
word "other" shall not be given a restrictive meaning
by reason of the fact that they are preceded by words
indicating a particular class of acts, matters or
things; and
(2) general words shall not be given a restrictive meaning
by reason of the fact that they are followed by
particular examples intended to be embraced by the
general words.
2. COVENANT
(A) Subject to the provisions of CLAUSE 3 (Limits on Clause 2), CLAUSE 4
(Exclusions) and CLAUSE 18 (Assignment), the Covenantor hereby covenants
with the Purchaser to pay to the Purchaser (so far as possible by way of
repayment of the consideration payable under the Agreement for the Shares)
an amount equal to any of the following:-
(i) any Tax Liability of a Group Company arising:-
(a) as a consequence of or by reference to any Event which occurred
on or before the Accounts Date or was deemed to occur on or
before the Accounts Date for the purposes of any Tax; or
<PAGE>
9
(b) in respect of or by reference to any Income, Profits or Gains
which were earned, accrued or received on or before the
Accounts Date or in respect of a period ending on or before the
Accounts Date;
(ii) any Tax Liability of a Group Company arising as a consequence of or
by reference to any of the following occurring or being deemed to
occur before Completion:-
(a) any Distribution; or
(b) the disposal of any asset (including trading stock) or the
supply of any service or business facility of any kind
(including a loan of money or the letting, hiring or licensing
of any tangible or intangible property) in circumstances where
the consideration actually received (if any) for such disposal
or supply is less than the consideration deemed to have been
received for the purposes of any Tax; or
(c) the relevant Group Company ceasing, or being deemed to cease,
to be a member of any group of companies or associated with any
other company for the purposes of any Tax; or
(d) any Event or the earning of any Income, Profits or Gains which
results in the relevant Group Company becoming liable to pay or
bear a Tax Liability chargeable directly or primarily against
or attributable directly or primarily to another person (not
being the Group Company in question); or
(e) any other Event which gives rise to a Tax Liability on deemed
(as opposed to actual) Income, Profits or Gains,
but only, in the case of any Event referred to in SUB-PARAGRAPH (b)
OF THIS PARAGRAPH, to the extent that the Tax Liability is
attributable to the difference between the consideration referred to
in that paragraph as being actually received and the consideration
so referred to as being deemed to have been received for the
purposes of any Tax;
(iii) any liability or increased liability to Tax of a Group Company which
is chargeable directly or primarily against or attributable directly
or primarily to any company, not being a Group Company, that may be
treated for the purposes of any Tax as being, or as having at any
time been, either a member of the same group of companies as the
Covenantor or otherwise associated with the Covenantor (a "Relevant
Company"), and which arises as a result of the failure of any
Relevant Company to discharge that liability or increased liability;
or
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10
(iv) any Tax Liability of Marconi (US) (including for the avoidance of
doubt any liability to Tax assessed by the State of California)
which would not have arisen but for its membership prior to
Completion of an affiliated, consolidated or combined group with any
other member of the Covenantor's Group; or
(v) any Tax Liability of Marconi (US) which arises as a consequence of
or by reference to a determination by the US Internal Revenue
Service that the GEC-Employees' Savings and Investment Plan has
wrongfully excluded part-time employees from the Profit-Sharing Plan
(as that term is defined in the Agreement); or
(vi) any Tax Liability of Marconi (UK) (a "Disposal Liability") arising
as a consequence of or by reference to the disposal of Longacres,
St. Albans (as described in paragraph 2.1(v) of the Disclosure
Letter) or the disposal of the share capital of Marconi Instruments
Pty Limited (as described in paragraph 9.1 of the Disclosure
Letter); or
(vii) any reasonable out-of-pocket legal and accounting or other
professional costs and expenses reasonably and properly incurred by
the Purchaser and/or a Group Company in connection either with any
such Tax Liability as is mentioned in PARAGRAPHS (i) TO (vi) or with
any Claim therefor or in taking or defending any action under this
deed.
(B) The Covenantor hereby covenants with the Purchaser that (save in any case
where it has obtained the prior approval of the Purchaser) it will not
cause or permit any member of the Covenantor's Group or other company
affiliated with the Covenantor (including, before but not after Completion,
any Group Company) to make or change any Tax election, take any position on
any Tax return, adjust the Tax basis of any asset, settle any Tax dispute
or otherwise take any action which results after Completion in any
increased liability to Tax or reduction of any Tax Asset of Marconi (US)
and the Covenantor agrees that Marconi (US) is to have no liability for any
resulting Tax and that it will indemnify and hold harmless Marconi (US)
against any such Tax.
3. LIMITS ON CLAUSE 2
The covenant given in CLAUSE 2 (Covenant) shall not cover any Tax Liability of
any Group Company:-
(i) to the extent that provision or reserve in respect of that Tax
Liability was made in the Accounts; or
(ii) to the extent that that Tax Liability arises or is increased as a
result only of any increase in rates of Tax or any change in law or
practice or any withdrawal of any extra-statutory concession by a
Tax Authority or any change in
<PAGE>
11
accountancy practice or principles generally accepted in the relevant
jurisdiction, being an increase, withdrawal or change made, in any
such case, after Completion with retrospective effect; or
(iii) to the extent that that Tax Liability would not have arisen but for
a voluntary transaction, action or omission carried out or effected
by a Group Company at any time after Completion which could
reasonably have been avoided and which the Purchaser or the Group
Company in question knew or ought reasonably to have known would
result in a Tax Liability, but not including any such transaction,
action or omission:-
(a) carried out or effected under a legally binding commitment
created on or before Completion; or
(b) carried out or effected in the ordinary course of the trade
carried on by the relevant Group Company as at Completion; or
(c) carried out or effected with the express approval of the
Covenantor; or
(iv) to the extent that that Tax Liability would not have arisen or
would have been reduced but for a failure or omission on the part
of the Purchaser and/or a Group Company after Completion to make
any election or claim any Relief, the making or claiming of which
was taken into account in computing the provision or reserve for
Tax in the Accounts; or
(v) to the extent that that Tax Liability arises by reason of a
voluntary disclaimer by a Group Company after Completion of the
whole or part of any allowance to which it is entitled under Part
II of the Capital Allowances Act 1990 or by reason of the
revocation by a Group Company after Completion of any claim for
Relief made (whether provisionally or otherwise) by it prior to
Completion; or
(vi) to the extent that that Tax Liability arises as a result of any
changes after Completion in the bases, methods or policies of
accounting of the Purchaser or a Group Company; or
(vii) to the extent that that Tax Liability has been made good by
insurers or otherwise compensated for without cost to the Purchaser
and/or a Group Company (so that, for the avoidance of doubt, the
Covenantor shall pay any increase in insurance premiums which
arises as a direct result of any such making good); or
(viii) to the extent that any Income, Profits or Gains to which that Tax
Liability is attributable were actually earned or received by or
actually accrued to a Group Company but were not (in either such
case) reflected in the Accounts,
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12
provided that such Income, Profits or Gains are still retained in
the relevant Group Company at Completion; or
(ix) to the extent that that Tax Liability arises or is increased as a
consequence of any failure by the Purchaser or a Group Company to
comply with any of their respective obligations under CLAUSES 5
(Mitigation), 11 (Claims Procedure), 12 (Tax Returns), or 15
(Counter Covenant); or
(x) to the extent that that Tax Liability would not have arisen but for
a cessation of, or any change in the nature or conduct of, any
trade carried on by a Group Company, being a cessation or change
occurring on or after Completion.
4. EXCLUSIONS
(A) The Covenantor shall not be liable under this deed in respect of any
Tax Liability unless the Tax Liability in question shall have arisen
within seven years from Completion and the Purchaser shall by notice
in writing to the Covenantor have given sufficient details of the
Claim to enable the Covenantor to identify the matter giving rise to
that Tax Liability and the amount claimed in respect thereof.
(B) The provisions of sub-paragraph 3.1 of Schedule 4 to the Agreement
shall apply to this deed as if set out herein.
5. MITIGATION
The Purchaser shall, at the direction in writing of the Covenantor, procure
that each Group Company take all such steps as the Covenantor may require to:-
(i) use in the manner hereinafter mentioned all such Reliefs arising as
a consequence of or by reference to any Event occurring (or deemed
to occur) on or before Completion or in respect of a period ended on
or before Completion and not as a consequence of or by reference to
an Event occurring (or deemed to occur) after Completion or in
respect of a period commencing after Completion as are available to
each Group Company to reduce or eliminate any Tax Liability in
respect of which the Purchaser would have been able to make a claim
against the Covenantor under this deed (such Reliefs including,
without limitation, Reliefs made available to a company by means of
a surrender from another company), the said use being to effect the
reduction or elimination of any such Tax Liability to the extent
specified by the Covenantor and permitted by law, and to provide to
the Covenantor, at the Covenantor's expense, a certificate from the
auditors (for the time being) of each relevant Group Company
confirming that all such Reliefs have been so used;
(ii) make all such claims and elections specified by the Covenantor in
respect of any accounting period of the relevant Group Company
ending on or before or
<PAGE>
13
deemed to end on or before Completion as have the effect of
reducing or eliminating any such Tax Liability as is mentioned
in PARAGRAPH (i), provided that no such claim or election
shall require that Group Company to use any Relief which
arises solely as a consequence of or by reference to an Event
occurring (or deemed to occur) after Completion or in respect
of a period commencing after Completion; and
(iii) allow the Covenantor to reduce or eliminate any Tax Liability by
surrendering or procuring the surrender by any company not being a
Group Company of Group Relief to any Group Company to the extent
permitted by law but without any payment being made in consideration
for such surrender.
6. PAYMENT FOR GROUP RELIEF
(A) Subject to the following provisions of this CLAUSE 6, the Purchaser
shall procure that (to the extent permitted by law) Marconi
(UK) shall, in respect of any accounting period ended on or
before Completion, make, give or enter into such claims,
elections, notices or consents (whether unconditional or
conditional, whether or not forming part of any other return
or tax document and whether provisional or final, and
including amendments to or withdrawals of earlier claims,
elections, notices or consents) as the Covenantor shall direct
in connection with the surrender of any Group Relief by any
member of the Covenantor's Group (the "Relevant Member") to
Marconi (UK). Payment shall be made in respect of any such
surrender as provided in the following provisions of this
CLAUSE 6.
(B) If, in respect of any accounting period ended on or before
Completion:-
(i) Marconi (UK) has paid Tax and a surrender effected pursuant to
SUB-CLAUSE (A) above has the effect of causing a repayment of some
or all of that Tax; or
(ii) provision for Tax is made in the Accounts and a surrender effected
pursuant to SUB-CLAUSE (A) has the effect of discharging all or
part of the liability represented by that provision; or
(iii) a liability to make a payment for Group Relief appears in the
Accounts, being a liability which has not been discharged before
Completion,
the Purchaser shall procure that a payment for Group Relief shall be made
in respect of any such surrender or liability by Marconi (UK) to the
Relevant Member in accordance with SUB-CLAUSES (C) AND (D).
(C) The amount of any such payment as is referred to in SUB-CLAUSE (B)
shall be equal to:-
(i) in a case where PARAGRAPH (B)(i) applies, the amount of Tax so
repaid (together with any repayment supplement or interest);
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14
(ii) in a case where PARAGRAPH (B)(ii) applies, the amount of Tax saved
as a result of the relevant surrender, up to a maximum of the
amount in respect of which provision is made in the Accounts; and
(iii) in a case where PARAGRAPH (B)(iii) applies, the amount of the
liability shown in the Accounts.
(D) Any payment under SUB-CLAUSE (B) shall be made:-
(i) in a case where PARAGRAPH (B)(i) applies, on the date three
Business Days after the date on which such repayment is received or
would be received but for being offset by some other liability to
Tax;
(ii) in a case where PARAGRAPH (B)(ii) applies, on the later of the date
on which such Tax would have become due and payable and three
Business Days after the date on which notice is given by the
Covenantor to the Purchaser of such surrender; and
(iii) in a case where PARAGRAPH (B)(iii) applies, on the later of the
date on which Tax would have become due and payable in the absence
of the relevant surrender and the date three Business Days after
the date on which notice is given by the Covenantor to the
Purchaser of the relevant surrender.
(E) If a payment is made under SUB-CLAUSE (B) and the surrender to which
it relates is subsequently determined to have been excessive,
invalid or to any extent ineffective, then the payment so made
(or so much of it as relates to such part of the surrender
found to be excessive, invalid or ineffective) shall be
refunded as soon as practicable thereafter, together with
interest from the date of payment until the date of the refund
at the Default Rate.
7. VAT
(A) The Covenantor shall ensure that each of Marconi (UK), MII and Sanders
Instruments is excluded from the VAT Group on or before the
date of the Agreement and shall use its reasonable endeavours
to secure that those three companies (the "UK Group Companies"
and each a "UK Group Company") are from the date of exclusion
treated as a separate group for the purposes of section 43
VATA.
(B) The Purchaser shall procure that the UK Group Companies pay to the
Covenantor, free and clear of any set-off or counterclaim, an amount
equal to any value added tax which is properly attributable to
supplies made by those companies (for the avoidance of doubt
taking into account both output tax and input tax), for which
the Covenantor is not liable under CLAUSE 2 (Covenant) and for
which the Covenantor is accountable but has not been
reimbursed by those companies.
<PAGE>
15
(C) The Covenantor hereby covenants to refund to the relevant UK Group
Company an amount equal to any value added tax which is
properly attributable to any member of the VAT Group other
than the UK Group Companies but for which that UK Group
Company is required to account by virtue of section 43(1) VATA.
(D) Payment of amounts due under THIS CLAUSE 7 shall be made within five
Business Days of Completion or, if later, two Business Days after
demand is made therefor (the "Due Date") and any such payment
not made by the Due Date shall thereafter carry interest at
the Default Rate until it is actually made.
(E) The Purchaser shall procure that the UK Group Companies provide the
Covenantor with such documents, information and assistance as it may
reasonably require to fulfil its statutory obligations as
representative member of the VAT Group.
8. OVER-PROVISIONS, RELIEFS, ETC.
(A) If the auditors for the time being of the relevant Group Company shall
certify (at the request and expense of the Covenantor) that
any provision for Tax in the Accounts (excluding any provision
for deferred Tax) has proved to be an over-provision, then the
amount of such over-provision shall be dealt with in
accordance with SUB-CLAUSE (C).
(B) If the auditors for the time being of the relevant Group Company shall
certify (at the request and expense of the Covenantor) that any Tax
Liability which has resulted in a payment having been made by
or becoming due from the Covenantor under this deed will give
rise to a Relief for that Group Company which would not
otherwise have arisen and a liability of a Group Company to
make an actual payment of Tax has been satisfied or avoided by
the use of that Relief (which Relief must be used before any
Post-Completion Relief then available), then the amount by
which that liability to Tax has been satisfied or avoided
shall be dealt with in accordance with SUB-CLAUSE (C).
(C) Where it is provided under SUB-CLAUSE (A) OR (B) that any amount (the
"RELEVANT AMOUNT") is to be dealt with in accordance with THIS
SUB-CLAUSE:-
(i) the Relevant Amount shall first be set off against any payment then
due from the Covenantor under this deed or in respect of the
warranties relating to Tax which appear in Schedule 3 to the
Agreement (the "Tax Warranties"); and
(ii) to the extent there is an excess, a refund shall be made to the
Covenantor of any previous payment or payments made by the
Covenantor under this deed or in respect of the Tax Warranties (and
not previously refunded under this clause) up to the amount of such
excess; and
(iii) to the extent that the excess referred to in PARAGRAPH (ii) OF THIS
SUB-CLAUSE is not exhausted under that paragraph, the remainder of
that excess shall be
<PAGE>
16
carried forward and set off against any future payments which
become due from the Covenantor under this deed or in respect of the
Tax Warranties.
(D) Where any such certification as is mentioned in SUB-CLAUSE (A) OR (B)
has been made, the Covenantor, the Purchaser or the Company
may request the auditors for the time being of the relevant
Group Company to review such certification in the light of all
relevant circumstances, including any facts which have become
known only since such certification, and to certify whether
such certification remains correct or whether, in the light of
those circumstances, the amount that was the subject of such
certification should be amended.
(E) If the auditors certify under SUB-CLAUSE (D) that an amount previously
certified should be amended, that amended amount shall be substituted
for the purposes of SUB-CLAUSE (C) as the Relevant Amount in
respect of the certification in question in place of the
amount originally certified, and such adjusting payment (if
any) as may be required by virtue of the above-mentioned
substitution shall be made as soon as practicable by the
Covenantor or (as the case may be) to the Covenantor.
9. REFUNDS AND CREDITS
(A) The Covenantor's Group shall be entitled to the benefit of any refunds
or credits of Taxes in respect of the income of Marconi (US)
attributable to or arising in any period ending on or before the
Accounts Date.
(B) The IFR Group or, as the case may be, Marconi (US) shall be entitled
to the benefit of any refunds or credits of Taxes in respect of the
income of Marconi (US) attributable to or arising in Tax periods
beginning on or after the Accounts Date.
(C) If in respect of or in connection with Marconi (US) any person
receives any refund or credit of amounts to which another person or
persons is or are entitled under this deed, the recipient or
recipients shall within ten Business Days pay such amounts to the
person or persons entitled thereto.
10. RECOVERY FROM OTHER PERSONS
If, in the event of any payment becoming due from the Covenantor under CLAUSE 2
(Covenant), a Group Company either is immediately entitled at the due date for
the making of that payment to recover from any person (including any Tax
Authority) any sum in respect of the Tax Liability that has resulted in that
payment becoming due from the Covenantor, or at some subsequent date becomes
entitled to make such a recovery, then the Purchaser shall procure that the
Group Company entitled to make that recovery shall promptly notify the
Covenantor of its entitlement and shall, if so required by the Covenantor and
at the Covenantor's sole expense, take all appropriate steps to enforce that
recovery (keeping the Covenantor fully and promptly informed of the progress of
any action taken); and if the Covenantor has made a payment under CLAUSE 2
(Covenant) in respect of the Tax
<PAGE>
17
Liability in question, the Purchaser shall account to the Covenantor for
whichever is the lesser of:-
(i) any sum so recovered by the relevant Group Company in respect of
that Tax Liability (subtracting any costs or expenses incurred by
the Purchaser or a Group Company in connection with the recovery
which have not already been reimbursed, but including any interest
or repayment supplement paid by the Tax Authority or other person
on or in respect thereof less any Tax chargeable on that Group
Company in respect of that interest); and
(ii) the amount paid by the Covenantor under CLAUSE 2 (Covenant) in
respect of that Tax Liability.
11. CLAIMS PROCEDURE
(A) Upon the Purchaser or a Group Company becoming aware of a Claim
relevant for the purposes of CLAUSE 2 of this deed, the Purchaser
shall as soon as practicable give written notice of that Claim to
the Covenantor or, as the case may be, shall procure that the relevant
Group Company as soon as practicable give written notice of that Claim
to the Covenantor, and the Purchaser shall further procure that the
relevant Group Company (if the Covenantor shall indemnify the
Purchaser and/or the Group Company in question to their reasonable
satisfaction against all losses, costs, damages and expenses,
including interest on overdue Tax, which may be incurred thereby) take
such action and give such information and assistance in connection
with the affairs of the relevant Group Company as the Covenantor may
reasonably and promptly by written notice request to avoid, resist,
appeal or compromise the Claim;
PROVIDED THAT:
(i) the Purchaser shall not be obliged to procure that a Group Company
appeal against any Tax Assessment if, the Covenantor having been
given written notice of the receipt of that Tax Assessment in
accordance with the preceding provisions of this sub-clause, that
Group Company has not within 21 days thereafter received
instructions in writing from the Covenantor, in accordance with
the preceding provisions of this sub-clause, to make that appeal;
(ii) the Purchaser shall not be obliged to procure that a Group Company
appeal against any Tax Assessment before any court, tribunal or
body of commissioners unless the Covenantor obtains and provides to
the Purchaser a written opinion from tax counsel of at least five
years' call to the effect that an appeal against the Tax Assessment
in question is in all the circumstances reasonable;
(iii) the Purchaser shall not be obliged to procure that a Group Company
take any action under THIS CLAUSE if the Covenantor or, prior to
Completion, the relevant Group Company has committed an act or is
responsible for an omission in
<PAGE>
18
relation to the Tax Assessment in question which constitutes
fraudulent conduct or dishonesty.
(B) The actions which the Covenantor may reasonably request under
SUB-CLAUSE (A) shall include (without limitation) the relevant Group
Company applying to postpone (so far as legally possible) the payment
of any Tax and/or allowing the Covenantor to take on or take over at
its own expense the conduct of all or any proceedings of whatsoever
nature arising in connection with the Claim in question, and, if the
Covenantor takes on or takes over the conduct of proceedings, the
Purchaser shall provide and shall procure that the relevant Group
Company provide such information and assistance as the Covenantor may
reasonably require in connection with the preparation for and conduct
of those proceedings.
12. TAX RETURNS
(A) The Covenantor or its duly authorised agent shall prepare the Tax
returns of each Group Company for all accounting periods ended on
or prior to the Accounts Date, to the extent that the same shall
not have been prepared before Completion.
(B) The Purchaser shall procure that the Group Companies shall cause the
returns mentioned in SUB-CLAUSE (A) to be authorised, signed and
submitted to the appropriate authority without amendment or with
such amendments as the Covenantor shall agree and shall give the
Covenantor or its agent all such assistance as may be required to
agree those returns with the appropriate authorities;
PROVIDED THAT the Purchaser shall not be obliged to procure that a Group
Company take any such action as is mentioned in THIS SUB-CLAUSE in relation
to any Tax return that is not true and accurate in all material respects.
(C) The Covenantor or its duly authorised agent shall prepare all
documentation and deal with all matters (including
correspondence) relating to the Tax returns of each Group Company
for all accounting periods ended on or prior to the Accounts Date
and the Purchaser shall procure that each Group Company shall
afford such access to its books, accounts and records as is
necessary and reasonable to enable the Covenantor or its duly
authorised agent to prepare those returns and conduct matters
relating thereto in accordance with the Covenantor's rights under
this clause.
(D) The Purchaser shall procure that the Covenantor is sent a draft of the
Tax return of Marconi (UK) for the accounting period beginning
before and ending on or after Completion (the "Current Period")
at least one month before its intended submission to a Tax
Authority and that its final form contains such alterations as
the Covenantor may lawfully request in respect of any matter
which might give rise to a Disposal Liability. The Covenantor
covenants to pay to the Purchaser an amount equal to any
liability to Tax suffered by Marconi (UK) which Marconi (UK)
would not have suffered but for an alteration made at the
Covenantor's request pursuant to this CLAUSE 12(D).
<PAGE>
19
(E) Nothing done by any Group Company pursuant to THIS CLAUSE shall in any
respect restrict or reduce any rights the Purchaser may have to make a
claim against the Covenantor under this deed in respect of any such
Tax Liability as is mentioned in CLAUSE 2 (Covenant).
13. DUE DATE OF PAYMENT
(A) Where the Covenantor becomes liable to make any payment under CLAUSE 2
(Covenant), the due date for the making of that payment shall be:-
(i) in a case that involves an actual payment of Tax by a Group
Company, the date that is the last date on which that Group Company
would have had to have paid to the appropriate Tax Authority the
Tax that has given rise to the Covenantor's liability under this
deed in order to avoid incurring a liability to interest or a
charge or penalty in respect of that Tax Liability; or
(ii) in a case falling within any of SUB-PARAGRAPHS (a)(1), (a)(2) AND
(a)(3) OF PARAGRAPH (ii) OF CLAUSE 1 (Interpretation), the date
falling seven days after the date when the Covenantor has been
notified by the relevant Group Company or the Purchaser that the
auditors for the time being of the relevant Group Company have
certified, at the request of the Purchaser or the Group Company in
question, that the Covenantor has a liability for a determinable
amount under CLAUSE 2 (Covenant).
(B) If any payment required to be made by the Covenantor under this deed
is not made by the due date for the making thereof, then, except to
the extent that the Covenantor's liability under CLAUSE 2
(Covenant) compensates the Purchaser for the late payment by
virtue of its extending to interest and penalties, that payment
shall carry interest from that due date until the date when the
payment is actually made at the Default Rate.
14. DEDUCTIONS FROM PAYMENTS, ETC.
(A) All sums payable by the Covenantor to the Purchaser under this deed
shall be paid free and clear of all deductions or withholdings
whatsoever, save only as may be required by law.
(B) If any deductions or withholdings are required by law to be made from
any of the sums payable as mentioned in SUB-CLAUSE (A), the
Covenantor shall be obliged to pay to the Purchaser such sum as
will, after the deduction or withholding has been made, leave the
Purchaser with the same amount as it would have been entitled to
receive in the absence of any such requirement to make a
deduction or withholding.
(C) If any sum payable by the Covenantor to the Purchaser under this deed
(other than interest under CLAUSE 13 (Due Date of Payment)) shall be
subject to a Tax Liability in the hands of the Purchaser, the
Covenantor shall be under the same obligation to
<PAGE>
20
make an increased payment in relation to that Tax Liability as if
the liability were a deduction or withholding required by law.
15. COUNTER COVENANT
(A) The Purchaser hereby covenants with the Covenantor to pay to the
Covenantor an amount equal to any of the following:-
(i) any liability or increased liability to Tax of the Covenantor or
any of its subsidiaries which arises as a result of or by reference
to any reduction or disallowance of Group Relief that would
otherwise have been available to the Covenantor or its relevant
subsidiary or subsidiaries where and to the extent that such
reduction or disallowance occurs as a result of or by reference
to:-
(a) any total or partial withdrawal effected by a Group Company
after Completion of any surrender of Group Relief that was
submitted by that Group Company to the Inland Revenue on or
before Completion in respect of any accounting period ended
on or before Completion; or
(b) any total or partial disclaimer made by a Group Company
after Completion of any capital allowances available to that
Group Company in respect of any accounting period ended on
or before Completion
save where any such withdrawal or disclaimer is made at the express
written request of the Covenantor;
(ii) any liability or increased liability to Tax of the Covenantor or
any of its subsidiaries:-
(a) which is caused by the failure of a Group Company to
discharge a liability to Tax (a "Group Company Liability")
which arises in respect of an accounting period beginning
before Completion; or
(b) which is otherwise properly attributable to Marconi (US)
(also a "GROUP COMPANY LIABILITY")
other than (in either case) a Group Company Liability in respect of
which the Purchaser could make a claim under CLAUSE 2 (Covenant);
and
(iii) any reasonable out-of-pocket legal and accounting or other
professional costs and expenses reasonably and properly incurred by
the Covenantor or any of its subsidiaries in connection with any
such liability or increased liability to Tax (or Claim therefor) or
in taking any action under THIS CLAUSE.
(B) The Purchaser hereby covenants that it will not cause or permit
Marconi (US) or any affiliate of the Purchaser to make or change any
Tax election, take any position on
<PAGE>
21
any Tax return, adjust the Tax basis of any asset, settle any Tax
dispute or otherwise take any action that results in any increased
liability to Tax or reduction of any Tax Asset of the Covenantor or any
member of the Covenantor's Group and agrees that the Covenantor and any
such member are to have no liability for any resulting Tax and that it
will indemnify and hold harmless the Covenantor and any such member
against any such Tax.
(C) (i) Upon the Covenantor becoming aware of a Claim relevant for the
purposes of SUB-CLAUSE ((A)), the Covenantor shall forthwith give
written notice of that Claim to the Purchaser, and the Covenantor
shall or, as the case may be, shall procure that the relevant
subsidiary will (if the Purchaser shall indemnify the Covenantor
and/or the relevant subsidiary to the Covenantor's reasonable
satisfaction against all losses, costs, damages and expenses,
including interest on overdue Tax, which may be incurred thereby)
take such action and give such information and assistance in
connection with the affairs of the Covenantor and/or the relevant
subsidiary as the Purchaser may reasonably and promptly by written
notice request to avoid, resist, appeal or compromise the Claim;
PROVIDED THAT the Covenantor shall not be obliged to appeal
against any Tax Assessment or to procure that any subsidiary
appeals against any Tax Assessment if, the Purchaser having been
given written notice of the receipt of that Tax Assessment in
accordance with the preceding provisions of THIS SUB-CLAUSE, the
Covenantor or the relevant subsidiary has not within 21 days
thereafter received instructions in writing from the Purchaser, in
accordance with the preceding provisions of THIS SUB-CLAUSE, to
make that appeal.
(ii) The actions which the Purchaser may reasonably request under
PARAGRAPH ((i)) OF THIS SUB-CLAUSE shall include (without limitation)
the Covenantor and/or the relevant subsidiary applying to postpone
(so far as legally possible) the payment of any Tax and/or allowing
the Purchaser to take on or take over at its own expense the conduct
of all or any proceedings of whatsoever nature arising in connection
with the Claim in question, and, if the Purchaser takes on or takes
over the conduct of proceedings, the Covenantor shall provide and/or
shall procure that the relevant subsidiary shall provide such
information and assistance as the Purchaser may reasonably require
in connection with the preparation for and conduct of those
proceedings.
(D) (i) Where the Purchaser becomes liable to make any payment under
SUB-CLAUSE ((A)), the due date for the making of that payment
shall be the date that is the last date on which the Covenantor
or, as the case may be, the relevant subsidiary, would have had to
have paid to the appropriate Tax Authority the Tax that has given
rise to the Purchaser's liability under SUB-CLAUSE ((A)) in order to
avoid incurring a liability to interest or a charge or penalty in
respect of that amount of Tax.
<PAGE>
22
(ii) If any payment required to be made by the Purchaser under
sub-clause ((A)) is not made by the due date for the making thereof,
then, except to the extent that the Purchaser's liability under
SUB-CLAUSE ((A)) compensates the Covenantor for the late payment by
virtue of its extending to interest and penalties, that payment
shall carry interest from that due date until the date when the
payment is actually made at the Default Rate.
(E) (i) All sums payable by the Purchaser to the Covenantor under
this clause shall be paid free and clear of all deductions or
withholdings whatsoever, save only as may be required by law.
(ii) If any deductions or withholdings are required by law to be made
from any of the sums payable as mentioned in PARAGRAPH ((i)) OF THIS
SUB-CLAUSE, the Purchaser shall be obliged to pay to the Covenantor
such sum as will, after the deduction or withholding has been made,
leave the Covenantor with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a
deduction or withholding.
(iii) If any sum payable by the Purchaser to the Covenantor under
this clause (other than interest under SUB-CLAUSE ((D))) shall be
subject to a liability to Tax in the hands of the Covenantor, the
Purchaser shall be under the same obligation to make an increased
payment in relation to that liability to Tax as if the liability
were a deduction or withholding required by law.
16. DEEMED END OF ACCOUNTING PERIOD
For the purposes of any part of this deed other than CLAUSE 12 (Tax Returns),
the accounting period of each Group Company which began on 1st April, 1997 shall
be deemed to have ended at Completion.
17. REMEDIES AND WAIVERS
(A) No delay or omission on the part of any party to this deed in exercising
any right, power or remedy provided by law or under this deed or any other
documents referred to in it shall:-
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(B) The single or partial exercise of any right, power or remedy provided by
law or under this deed shall not preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(C) The rights, powers and remedies provided in this deed are cumulative and
not exclusive of any rights, powers and remedies provided by law.
<PAGE>
23
18. ASSIGNMENT
(A) This deed and the benefits and obligations under it and any part of it
shall not be assignable except that the Purchaser may, upon giving written
notice to the Covenantor, assign the benefit (but not the burden) of this
deed to a member of the IFR Group (a "Group Assignment") or by way of
security to a lender to whom security is given over the Shares (a "Lender
Assignment"), if the terms of any such assignment provide:-
(i) (in the case of a Group Assignment) that any such assignee remains
a member of the IFR Group and that before such assignee ceases to
be a member of the IFR Group, the Purchaser will procure that the
benefit of this deed is assigned to the Purchaser or (upon giving
further written notice to the Covenantor) to another company within
the IFR Group (any such further assignment to be subject to the
same conditions as above); and
(ii) (in the case of a Group Assignment or a Lender Assignment) that if
the liability of the Covenantor shall be increased by reason of
such assignment, the assignee shall be entitled to claim against
the Covenantor only such amount as would equal the liability of the
Covenantor had no assignment taken place.
(B) This deed and the benefits and obligations under it and any part of it
shall not be assignable by the Covenantor except that the Covenantor may,
upon giving written notice to the Purchaser, assign the benefit (but not
the burden) of this deed to a member of the Covenantor's Group provided
that
(i) any such assignee remains a member of the Covenantor's Group; and
(ii) before such assignee ceases to be a member of the Covenantor's
Group, the Covenantor will procure that the benefit of this deed is
assigned to the Covenantor or (upon giving further written notice
to the Purchaser) to another company within the Covenantor's Group
(any such further assignment to be subject to the same conditions
as above); and
(iii) if the liability of the Purchaser shall be increased by reason of
such assignment the assignee shall be entitled to claim against the
Covenantor only such amount as would equal the liability of the
Covenantor had no assignment taken place.
(C) CLAUSE 2 (Covenant) shall continue to have effect for all purposes in
relation to a Group Company notwithstanding that such Group Company has
ceased to be owned by a member of the IFR Group (a "Group Cessation"),
provided that the liability of the Covenantor in respect of any claim under
that clause made after a Group Cessation shall not exceed the amount of the
liability (if any) which it would have had in respect of such claim had the
claim been made before a Group Cessation and
<PAGE>
24
provided further that this clause 18(C) shall not impair or affect in any
way the restrictions on assignment under clause 18(A).
19. FURTHER ASSURANCE
Each of the parties shall from time to time, on being required to do so by
any other party to this deed now or at any time in the future, execute or
procure the execution of all such documents in a form satisfactory to the
party concerned and except as provided elsewhere in, and subject to the terms
of the Agreement, each of the parties shall, at its own expense do or, so far
as it is able, procure to be done, all such acts as the parties may, in each
such case, reasonably consider necessary for giving full effect to this deed
and securing to them the full benefit of the rights, powers and remedies
conferred upon them in this deed.
20. NOTICES
(A) Any notice or other communication given or made under or in connection with
the matters contemplated by this deed shall, unless expressly stated
otherwise, be in writing, other than writing on the screen of a visual
display unit or other similar device which shall not be treated as writing
for the purposes of this clause.
(B) Any such notice or other communication shall be addressed as provided in
sub-clause (C) and sent by personal delivery or by first class post
PROVIDED THAT if, in accordance with the above provisions, any such notice
or other communication is given or made outside Working Hours, such notice
or other communication shall be deemed to be given or made at the start of
Working Hours on the next Business Day.
(C) The relevant addressee and address of each party for the purposes of this
deed, subject to SUB-CLAUSE (D), are:-
NAME OF PARTY ADDRESSEE ADDRESS
The Covenantor Company Secretary 1 Stanhope Gate,
London W1A 1EH
but from 1st March, 1998,
1 Bruton Street,
London W1
The Purchaser The Managing Director c/o Marconi Instruments,
Longacres House,
Norton Green Road,
Stevenage,
Hertfordshire,
SG1 2BA
<PAGE>
25
with a copy to A.N. Drake Boodle Hatfield,
61 Brook Street,
London WIY 2BL
(D) A party may notify the other party to this deed of a change to its name,
relevant addressee or address for the purposes of SUB-CLAUSE (C) PROVIDED
THAT such notification shall only be effective on:-
(i) the date specified in the notification as the date on which the
change is to take place; or
(ii) if no date is specified or the date specified is less than five
clear Business Days after the date on which notice is given, the
date falling five clear Business Days after notice of any such
change has been given.
21. COUNTERPARTS
(A) This deed may be executed in any number of counterparts, and by the parties
on separate counterparts, but shall not be effective until each party has
executed at least one counterpart.
(B) Each counterpart shall constitute an original of this deed, but all the
counterparts shall together constitute but one and the same instrument.
22. TIME OF ESSENCE
Save as otherwise expressly provided, time is of the essence of each
provision of this deed.
23. INVALIDITY
If at any time any provision of this deed is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, that shall
not affect or impair:-
(A) the legality, validity or enforceability in that jurisdiction of any other
provision of this deed; or
(B) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this deed.
24. GOVERNING LAW
This deed shall be governed by and construed in accordance with English law.
<PAGE>
26
25. JURISDICTION
Each party to this deed irrevocably agrees that any Proceedings against it
may be brought in the courts of England. Nothing contained in this clause
shall limit either party's rights to take Proceedings against the other in
any other court of competent jurisdiction, nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of Proceedings
in any other jurisdiction, whether concurrently or not, to the extent
permitted by the law of such other jurisdiction.
IN WITNESS WHEREOF this document has been executed and delivered as a deed
the day and year first before written.
Signed as a deed by )
THE GENERAL ELECTRIC )
COMPANY, p.l.c. )
acting by ) .................................. Director
)
and ) ........................ Director/Secretary
Signed as a deed by )
IFR SYSTEMS LIMITED )
acting by ) .................................. Director
)
and ) ........................ Director/Secretary
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. INTERPRETATION 1
2. COVENANT 8
3. LIMITS ON CLAUSE 2 10
4. EXCLUSIONS 12
5. MITIGATION 12
6. PAYMENT FOR GROUP RELIEF 13
7. VAT 14
8. OVER-PROVISIONS, RELIEFS, ETC. 15
9. REFUNDS AND CREDITS 16
10. RECOVERY FROM OTHER PERSONS 16
11. CLAIMS PROCEDURE 17
12. TAX RETURNS 18
13. DUE DATE OF PAYMENT 19
14. DEDUCTIONS FROM PAYMENTS, ETC. 19
15. COUNTER COVENANT 20
16. DEEMED END OF ACCOUNTING PERIOD 22
17. REMEDIES AND WAIVERS 22
18. ASSIGNMENT 23
19. FURTHER ASSURANCE 24
20. NOTICES 24
21. COUNTERPARTS 25
22. TIME OF ESSENCE 25
<PAGE>
23. INVALIDITY 25
24. GOVERNING LAW 25
25. JURISDICTION 26
</TABLE>
<PAGE>
DATED FEBRUARY, 1998
THE GENERAL ELECTRIC COMPANY, P.L.C.
(the Covenantor)
and
IFR SYSTEMS LIMITED
(the Purchaser)
--------------------
DEED OF TAX COVENANT
--------------------
Slaughter and May
35 Basinghall Street
London EC2V 5DB
(GJA/WNCW)
<PAGE>
EXHIBIT 10.01
EXECUTION COPY
CREDIT AGREEMENT
Dated as of February 5, 1998
among
IFR SYSTEMS, INC.
THE INSTITUTIONS FROM TIME TO TIME
PARTIES HERETO AS LENDERS
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
ARTICLE I: DEFINITIONS
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . .1
1.2 References. . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.3 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . 23
ARTICLE II: THE TERM LOAN AND REVOLVING LOAN FACILITIES
2.1 Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Swing Line Loans. . . . . . . . . . . . . . . . . . . . . . . 27
2.4 Rate Options for all Advances; Maximum Interest Periods . . . 29
2.5 Optional Payments; Mandatory Prepayments. . . . . . . . . . . 29
2.6 Reduction of Commitments. . . . . . . . . . . . . . . . . . . 31
2.7 Method of Borrowing . . . . . . . . . . . . . . . . . . . . . 31
2.8 Method of Selecting Types and Interest
Periods for Advances. . . . . . . . . . . . . . . . . . . . . 32
2.9 Minimum Amount of Each Advance. . . . . . . . . . . . . . . . 32
2.10 Method of Selecting Types and Interest Periods for Conversion
and Continuation of Advances. . . . . . . . . . . . . . . . . 32
2.11 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . 33
2.12 Method of Payment . . . . . . . . . . . . . . . . . . . . . . 33
2.13 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.14 Telephonic Notices. . . . . . . . . . . . . . . . . . . . . . 34
2.15 Promise to Pay; Interest and Commitment Fees; Interest Payment
Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts. . . 34
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions. . . . . . . . 40
2.17 Lending Installations . . . . . . . . . . . . . . . . . . . . 40
2.18 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . 40
2.19 Termination Date. . . . . . . . . . . . . . . . . . . . . . . 40
2.20 Replacement of Certain Lenders. . . . . . . . . . . . . . . . 40
2.21 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . 41
2.22 Market Disruption . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE III: THE LETTER OF CREDIT FACILITY
3.1 Obligation to Issue . . . . . . . . . . . . . . . . . . . . . 42
3.2 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.3 Types and Amounts . . . . . . . . . . . . . . . . . . . . . . 42
3.4 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.5 Procedure for Issuance of Letters of Credit . . . . . . . . . 43
3.6 Letter of Credit Participation. . . . . . . . . . . . . . . . 44
3.7 Reimbursement Obligation. . . . . . . . . . . . . . . . . . . 44
3.8 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . 44
3.9 Issuing Bank Reporting Requirements . . . . . . . . . . . . . 45
i
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
3.10 Indemnification: Exoneration. . . . . . . . . . . . . . . . . 45
3.11 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IV: CHANGE IN CIRCUMSTANCES
4.1 Yield Protection. . . . . . . . . . . . . . . . . . . . . . . 46
4.2 Changes in Capital Adequacy Regulations . . . . . . . . . . . 47
4.3 Availability of Types of Advances . . . . . . . . . . . . . . 48
4.4 Funding Indemnification . . . . . . . . . . . . . . . . . . . 48
4.5 Lender Statements: Survival of Indemnity. . . . . . . . . . . 48
ARTICLE V: CONDITIONS PRECEDENT
5.1 Initial Advances and Letters of Credit. . . . . . . . . . . . 49
5.2 Each Advance and Letter of Credit . . . . . . . . . . . . . . 50
ARTICLE VI: REPRESENTATIONS AND WARRANTIES
6.1 Organization; Corporate Powers. . . . . . . . . . . . . . . . 51
6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.3 No Conflict; Governmental Consents. . . . . . . . . . . . . . 51
6.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . 52
6.5 No Material Adverse Change. . . . . . . . . . . . . . . . . . 53
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.7 Litigation; Loss Contingencies and Violations . . . . . . . . 53
6.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 54
6.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.10 Accuracy of Information . . . . . . . . . . . . . . . . . . . 55
6.11 Securities Activities . . . . . . . . . . . . . . . . . . . . 55
6.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . 55
6.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 55
6.14 Assets and Properties . . . . . . . . . . . . . . . . . . . . 55
6.15 Statutory Indebtedness Restrictions . . . . . . . . . . . . . 56
6.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 56
6.18 Marconi Acquisition . . . . . . . . . . . . . . . . . . . . . 56
6.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . 56
6.20 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VII: COVENANTS
7.1 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.2 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 62
7.3 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 64
7.4 Financial Covenants . . . . . . . . . . . . . . . . . . . . . 70
ii
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
ARTICLE VIII: DEFAULTS
8.1 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES
9.1 Termination of Commitments; Acceleration. . . . . . . . . . . 74
9.2 Defaulting Lender . . . . . . . . . . . . . . . . . . . . . . 74
9.3 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.4 Preservation of Rights. . . . . . . . . . . . . . . . . . . . 76
ARTICLE X: GENERAL PROVISIONS
10.1 Survival of Representations . . . . . . . . . . . . . . . . . 77
10.2 Governmental Regulation . . . . . . . . . . . . . . . . . . . 77
10.3 Performance of Obligations. . . . . . . . . . . . . . . . . . 77
10.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 77
10.6 Several Obligations; Benefits of this Agreement . . . . . . . 77
10.7 Expenses; Indemnification . . . . . . . . . . . . . . . . . . 78
10.8 Numbers of Documents. . . . . . . . . . . . . . . . . . . . . 79
10.9 Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.10 Severability of Provisions. . . . . . . . . . . . . . . . . . 79
10.11 Nonliability of Lenders . . . . . . . . . . . . . . . . . . . 79
10.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 80
10.13 Consent to Jurisdiction; Service of Process; Jury Trial . . . 80
ARTICLE XI: THE AGENT
11.1 Appointment; Nature of Relationship . . . . . . . . . . . . . 81
11.2 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.3 General Immunity. . . . . . . . . . . . . . . . . . . . . . . 81
11.4 No Responsibility for Loans, Creditworthiness, Recitals, Etc. 82
11.5 Action on Instructions of Lenders . . . . . . . . . . . . . . 82
11.6 Employment of Agents and Counsel. . . . . . . . . . . . . . . 82
11.7 Reliance on Documents; Counsel. . . . . . . . . . . . . . . . 82
11.8 The Agent's Reimbursement and Indemnification . . . . . . . . 82
11.9 Rights as a Lender. . . . . . . . . . . . . . . . . . . . . . 83
11.10 Lender Credit Decision. . . . . . . . . . . . . . . . . . . . 83
11.11 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 83
11.12 Collateral Documents. . . . . . . . . . . . . . . . . . . . . 83
ARTICLE XII: SETOFF; RATABLE PAYMENTS
12.1 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.2 Ratable Payments. . . . . . . . . . . . . . . . . . . . . . . 84
iii
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
12.3 Application of Payments . . . . . . . . . . . . . . . . . . . 85
12.4 Relations Among Lenders . . . . . . . . . . . . . . . . . . . 86
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 86
13.2 Participations. . . . . . . . . . . . . . . . . . . . . . . . 86
13.3 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 88
13.5 Dissemination of Information. . . . . . . . . . . . . . . . . 88
ARTICLE XIV: NOTICES
14.1 Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . 89
14.2 Change of Address . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE XV: COUNTERPARTS
iv
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A -- Commitments
(Definitions)
EXHIBIT B-1 -- Form of Revolving Note
(Definitions)
EXHIBIT B-2 -- Form of Swing Line Note
(Definitions)
EXHIBIT B-3 -- Form of Tranche A Term Note (Definitions)
EXHIBIT B-4 -- Form of Tranche B Term Note (Definitions)
EXHIBIT C -- Form of Borrowing/Conversion/Continuation Notice
(Section 2.3 and Section 2.8 and Section 2.10)
EXHIBIT D -- Form of Request for Letter of Credit (Section 3.4)
EXHIBIT E -- Form of Assignment and Acceptance Agreement
(Sections 2.20 and 13.3)
EXHIBIT F -- Form of Borrower's US Counsel's Opinion and Form of
Borrower's UK Counsel's Opinion (Section 5.1)
EXHIBIT G -- List of Closing Documents
(Section 5.1)
EXHIBIT H -- Form of Officer's Certificate
(Sections 5.2 and 7.1(A)(iii))
EXHIBIT I -- Form of Compliance Certificate
(Sections 5.2 and 7.1(A)(iii))
EXHIBIT J -- Form of Subsidiary Guaranty
(Definitions)
v
<PAGE>
SCHEDULES
Schedule 1.1.1 -- Permitted Existing Indebtedness (Definitions)
Schedule 1.1.2 -- Permitted Existing Investments (Definitions)
Schedule 1.1.3 -- Permitted Existing Liens (Definitions)
Schedule 1.1.4 -- Permitted Existing Contingent Obligations (Definitions)
Schedule 6.3 -- Conflicts; Governmental Consents (Section 6.3)
Schedule 6.4 -- Pro Forma Financial Statements (Section 6.4(A))
Schedule 6.7 -- Litigation; Loss Contingencies (Section 6.7)
Schedule 6.8 -- Subsidiaries (Section 6.8)
Schedule 6.9 -- ERISA (Section 6.9)
Schedule 6.16 -- Insurance (Sections 6.16 and 7.2(E))
Schedule 6.18 -- Marconi Acquisition Conditions (Section 6.18)
Schedule 6.19 -- Environmental Matters (Section 6.19)
Schedule I -- Eurocurrency Payment Office
vi
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of February 5, 1998 is entered into among
IFR Systems, Inc., a Delaware corporation, the institutions from time to time
parties hereto as Lenders, whether by execution of this Agreement or an
Assignment Agreement pursuant to SECTION 13.3, and The First National Bank of
Chicago, in its capacity as contractual representative for itself and the other
Lenders. The parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1 CERTAIN DEFINED. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined.
As used in this Agreement:
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage of voting power) of the outstanding
equity interests of another Person.
"ACQUISITION AGREEMENT" means that certain Share Sale and Purchase
Agreement, dated as of February 5, 1998, by and among The General Electric
Company, p.l.c., IFR Systems Limited and the Borrower.
"ADVANCE" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by the Lenders to the Borrower of the same Type and, in
the case of Eurocurrency Rate Advances, in the same currency and for the same
Interest Period.
"AFFECTED LENDER" is defined in SECTION 2.20 hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of greater than ten percent (10%) or more of any class of voting
securities (or other voting interests) of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
Capital Stock, by contract or otherwise.
"AGENT" means First Chicago in its capacity as contractual representative
for itself and the Lenders pursuant to ARTICLE XI hereof and any successor Agent
appointed pursuant to ARTICLE XI hereof.
"AGGREGATE REVOLVING LOAN COMMITMENT" means the aggregate of the Revolving
Loan
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Commitments of all the Lenders, as may be reduced from time to time pursuant to
the terms hereof. The initial Aggregate Revolving Loan Commitment is Thirty
Million and 00/100 Dollars ($30,000,000.00).
"AGGREGATE TERM LOAN COMMITMENT" means the aggregate of the Tranche A Term
Loan Commitments and the Tranche B Term Loan Commitments of all the Lenders.
The Aggregate Term Loan Commitment is One Hundred Million and 00/100 Dollars
($100,000,000.00).
"AGREED CURRENCIES" means (i) Dollars, (ii) so long as such currency
remains an Eligible Currency, Pounds Sterling; and (iii) any other Eligible
Currency which the Borrower requests the Agent to include as an Agreed Currency
hereunder and which is acceptable to one-hundred percent (100%) of the Lenders;
PROVIDED that the Agent shall promptly notify each Lender of each such request
and each Lender shall be deemed not to have agreed to each such request unless
its written consent thereto has been received by the Agent within five (5)
Business Days from the date of such notification by the Agent to such Lender.
"AGREEMENT" means this Credit Agreement, as it may be amended, restated or
otherwise modified and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles as in effect in the United States as of the date of this Agreement,
applied in a manner consistent with that used in preparing the financial
statements of the Borrower referred to in SECTION 6.4(B)(1) hereof, PROVIDED,
HOWEVER, that with respect to the calculation of financial ratios and other
financial tests required by this Agreement, "Agreement Accounting Principles"
means generally accepted accounting principles as in effect in the United States
as of the date of this Agreement, applied in a manner consistent with that used
in preparing the financial statements of the Borrower referred to in SECTION
6.4(A) hereof; PROVIDED, FURTHER, HOWEVER, all PRO FORMA financial statements
reflecting Acquisitions shall be prepared in accordance with the requirements
established by the Commission for acquisition accounting for reporting
acquisitions by public companies (whether or not such Acquisitions are required
to be publicly reported).
"ALTERNATE BASE RATE" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Corporate Base Rate for such day and
(ii) the sum of (a) the Federal Funds Effective Rate for such day and (b)
one-half of one percent (0.5%) per annum.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means, as at any date of
determination, the rate per annum then applicable in the determination of the
amount payable under SECTION 2.15(C)(i) hereof determined in accordance with the
provisions of SECTION 2.15(D)(ii) hereof.
"APPLICABLE EUROCURRENCY MARGINS" means, as at any date of determination,
the rate per annum then applicable to Eurocurrency Rate Loans which are Tranche
A Term Loans, Revolving Loans or Tranche b Term Loans, as applicable, determined
in accordance with the provisions of SECTION 2.15(D)(ii) hereof.
"APPLICABLE FLOATING RATE MARGINS" means, as at any date of determination,
the rate per annum then applicable to Floating Rate Loans which are Tranche A
Term Loans, Revolving Loans or Tranche B Term Loans, as applicable, determined
in accordance with the provisions of SECTION 2.15(D)(ii) hereof.
"APPLICABLE L/C FEE PERCENTAGE" means, as at any date of determination, a
rate per annum
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equal to the Applicable Eurocurrency Margin for Tranche A Term Loans and
Revolving Loans in effect on such date.
"APPROXIMATE EQUIVALENT AMOUNT" of any currency with respect to any amount
of Dollars shall mean the Equivalent Amount of such currency with respect to
such amount of Dollars at such date, rounded up to the nearest amount of such
currency as determined by the Agent from time to time.
"ARRANGER" means First Chicago Capital Markets, Inc., in its capacity as
the arranger for the loan transaction evidenced by this Agreement.
"ASSIGNMENT AGREEMENT" shall mean an assignment and acceptance agreement
entered into in connection with an assignment pursuant to SECTION 13.3 hereof in
substantially the form of EXHIBIT E.
"ASSET SALE" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Equity Interests of any Subsidiary of such Person)
other than (i) the sale of Inventory in the ordinary course of business and (ii)
the sale or other disposition of any obsolete manufacturing Equipment disposed
of in the ordinary course of business.
"AUTHORIZED OFFICER" means any of the President, any Vice President or
Chief Financial Officer of the Borrower, acting singly.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which the Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" means IFR Systems, Inc., a Delaware corporation, together with
its successors and assigns, including a debtor-in-possession on behalf of the
Borrower.
"BORROWER PLEDGE AGREEMENT" means that certain Pledge Agreement of even
date herewith executed by the Borrower in favor of the Agent for the benefit of
the Holders of Secured Obligations, as amended, restated or otherwise modified
from time to time, pledging (i) 100% of the Capital Stock of each Domestic
Incorporated Subsidiary and (ii) the lesser of (a) 65% of all of the outstanding
Capital Stock of each Foreign Incorporated Subsidiary and (b) all of the
outstanding Capital Stock of capital stock of each Foreign Incorporated
Subsidiary currently or hereafter owned by the Borrower.
"BORROWING DATE" means a date on which an Advance or Swing Line Loan is
made hereunder.
"BORROWING/CONVERSION/CONTINUATION NOTICE" is defined in SECTION 2.8
hereof.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurocurrency Rate, a day (other than
a Saturday or Sunday) on which banks are open for business in Chicago, Illinois
and New York, New York and on which dealings in Dollars and the other Agreed
Currencies are carried on in the London interbank market and (ii) for all other
purposes a day (other than a Saturday or Sunday) on which banks are open for
business in Chicago, Illinois and New York, New York.
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"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness) by the Borrower
and its Subsidiaries during that period that, in conformity with Agreement
Accounting Principles, are required to be included in or reflected by the
property, plant, Equipment or similar fixed asset accounts reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurocurrency certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations for any such deposits with a term of more than ninety (90)
days); (iii) shares of money market, mutual or similar funds having assets in
excess of $100,000,000 and the investments of which are limited to investment
grade securities (i.e., securities rated at least Baa by Moody's Investors
Service, Inc. or at least BBB by Standard & Poor's Corporation); and (iv)
commercial paper of United States and foreign banks and bank holding companies
and their subsidiaries and United States and foreign finance, commercial
industrial or utility companies which, at the time of acquisition, are rated A-1
(or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED that the maturities of such Cash Equivalents
shall not exceed 365 days.
"CHANGE" is defined in SECTION 4.2 hereof.
"CHANGE OF CONTROL" means an event or series of events by which:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act of 1934), becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act of 1934, except
that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of twenty percent (20%) or more of the combined voting power of
the Borrower's outstanding Capital Stock ordinarily having the right to
vote at an election of directors; or
(b) during any period of twelve (12) consecutive calendar months,
individuals: (i)
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who were directors of the Borrower on the first day of such period, or (ii)
whose election or nomination for election to the board of directors of the
Borrower was recommended or approved by at least a majority of the
directors then still in office who were directors of the Borrower on the
first day of such period, or whose election or nomination for election was
so approved, shall cease to constitute a majority of the board of directors
of the Borrower; or
(c) the Borrower consolidates with or merges into another corporation
or conveys, transfers or leases all or substantially all of its property to
any Person, or any corporation consolidates with or merges into the
Borrower, in either event pursuant to a transaction in which the
outstanding Capital Stock of the Borrower is reclassified or changed into
or exchanged for cash, securities or other property; or
(d) the Borrower shall cease to own and control all of the economic
and voting rights associated with all of the outstanding Capital Stock of
its Subsidiaries, including, without limitation, Marconi (US) and Marconi
(UK).
"CLOSING DATE" means the date on which the Term Loans and the initial
Revolving Loans are advanced hereunder.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by the Borrower or any of its Subsidiaries in or upon which a
security interest, lien or mortgage is granted to the Agent, for the benefit of
the Holders of Secured Obligations, or to the Agent, for the benefit of the
Lenders, whether under the Security Agreement, under any of the other Collateral
Documents or under any of the other Loan Documents.
"COLLATERAL DOCUMENTS" means all agreements, instruments and documents
executed in connection with this Agreement, including, without limitation, the
Security Agreement, the Borrower Pledge Agreement, the Guaranties, the
Subsidiary Security Agreements, the Intellectual Property Security Agreements,
the Equitable Charge and all other security agreements, mortgages, loan
agreements, notes, guarantees, pledges, powers of attorney, consents,
assignments, contracts, fee letters, notices, leases, financing statements and
all other written matter whether heretofore, now, or hereafter executed by or on
behalf of the Borrower or any of its Subsidiaries and delivered to the Agent or
any of the Lenders, together with all agreements and documents referred to
therein or contemplated thereby.
"COMMISSION" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"COMMITMENT" means, for each Lender, collectively, such Lender's Revolving
Loan Commitment, Tranche A Term Loan Commitment and Tranche B Term Loan
Commitment.
"CONSOLIDATED NET WORTH" means, at a particular date, all amounts which
would be included under shareholders' or members' equity for the Borrower and
its consolidated Subsidiaries determined in accordance with Agreement Accounting
Principles PLUS an amount equal to the actual amount of any reduction of the
Borrower's and its consolidated Subsidiaries' Consolidated Net Worth
attributable to write-offs for goodwill made in connection with the Marconi
Acquisition to the extent such reduction is taken on or before June 30, 1998 and
in an amount not to exceed $20,000,000.
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"CONSOLIDATED TANGIBLE ASSETS" means the total assets of the Borrower and
its Subsidiaries on a consolidated basis, but excluding therefrom all items that
are treated as intangibles under Agreement Accounting Principles.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"CONTINGENT OBLIGATION", as applied to any Person, means any Contractual
Obligation, contingent or otherwise, of that Person with respect to any
Indebtedness of another or other obligation or liability of another, including,
without limitation, any such Indebtedness, obligation or liability of another
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received. The amount of any Contingent
Obligation shall be equal to the present value of the portion of the obligation
so guaranteed or otherwise supported, in the case of known recurring
obligations, and the maximum reasonably anticipated liability in respect of the
portion of the obligation so guaranteed or otherwise supported assuming such
Person is required to perform thereunder, in all other cases.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any equity or debt securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument, in any case in writing, to which that
Person is a party or by which it or any of its properties is bound, or to which
it or any of its properties is subject.
"CONTROLLED GROUP" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in CLAUSE (i) above or any
partnership or trade or business described in CLAUSE (ii) above.
"CONTROLLED SUBSIDIARY" of any Person means a Subsidiary of such Person (i)
90% or more of the total Equity Interests or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more wholly-owned Subsidiaries of such Person and (ii) of
which such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies, whether through the ownership
of voting securities, by agreement or otherwise.
"CORPORATE BASE RATE" means the corporate base rate of interest announced
by First Chicago from time to time, changing when and as said corporate base
rate changes.
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"CURE LOAN" is defined in SECTION 9.2(iii) hereof.
"CUSTOMARY PERMITTED LIENS" means:
(i) Liens (other than Environmental Liens and Liens in favor of the
IRS or the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or (if foreclosure,
distraint, sale or other similar proceedings shall not have been commenced
or any such proceeding after being commenced is stayed) which are being
contested in good faith by appropriate proceedings properly instituted and
diligently conducted and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
(iii) Liens (other than Environmental Liens and Liens in favor of the
IRS or the PBGC) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance
or other types of social security benefits or to secure the performance of
bids, tenders, sales, contracts (other than for the repayment of borrowed
money), surety, appeal and performance bonds; PROVIDED that (A) all such
Liens do not in the aggregate materially detract from the value of the
Borrower's or such Subsidiary's assets or property taken as a whole or
materially impair the use thereof in the operation of the businesses taken
as a whole, and (B) all Liens securing bonds to stay judgments or in
connection with appeals do not secure at any time an aggregate amount
exceeding $1,000,000;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not in any case materially detract from the value
of the property subject thereto or interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute a Default under SECTION 8.1(H)
hereof; and
(vi) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its Subsidiaries
in the ordinary course of business.
"DEFAULT" means an event described in ARTICLE VIII hereof.
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"DOLLAR" and "$" means dollars in the lawful currency of the United States.
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"DOLLAR AMOUNT" of any currency at any date shall mean (i) the amount of
such currency if such currency is Dollars or (ii) the Equivalent Amount of
Dollars if such currency is any currency other than Dollars, calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange of the
Agent for such Currency on the London market at 11:00 a.m. (London time) two
Business Days prior to the date on which such amount is to be determined.
"DOMESTIC INCORPORATED SUBSIDIARY" means a Subsidiary of the Borrower
organized under the laws of a jurisdiction located in the United States of
America.
"EBITDA" means, for any period, on a consolidated basis for the Borrower
and its Subsidiaries, the sum of the amounts for such period, without
duplication, of (i) Net Income, PLUS (ii) accrued interest expense to the extent
deducted in computing Net Income, PLUS (iii) charges against income for foreign,
federal, state and local taxes to the extent deducted in computing Net Income,
PLUS (iv) depreciation expense to the extent deducted in computing Net Income,
PLUS (v) amortization expense, including, without limitation, amortization of
goodwill and other intangible assets to the extent deducted in computing Net
Income, PLUS (vi) other non-cash charges classified as long-term deferrals in
accordance with Agreement Accounting Principles to the extent deducted in
computing Net Income, PLUS (vii) other extraordinary non-cash charges to the
extent deducted in computing Net Income, MINUS (viii) other extraordinary
non-cash credits to the extent added in computing Net Income.
"ELIGIBLE CURRENCY" means any currency other than Dollars that is readily
available, freely traded, in which deposits are customarily offered to banks in
the London interbank market, convertible into Dollars in the international
interbank market available to the Lenders in such market and as to which an
Equivalent Amount may be readily calculated. If, after the designation by the
Lenders of any currency as an Agreed Currency, currency control or other
exchange regulations are imposed in the country in which such currency is issued
with the result that different types of such currency are introduced, such
country's currency is, in the determination of the Agent, no longer readily
available or freely traded or (ii) as to which, in the determination of the
Agent, an Equivalent Amount is not readily calculable (each of CLAUSE (i) and
(ii), a "DISQUALIFYING EVENT"), then the Agent shall promptly notify the Lenders
and the Borrower, and such country's currency shall no longer be an Agreed
Currency until such time as the Disqualifying Event(s) no longer exist, but in
any event within five (5) Business Days of receipt of such notice from the
Agent, the Borrower shall repay all Loans in such currency to which the
Disqualifying Event applies or convert such Loans into Loans in Dollars or
another Agreed Currency, subject to the other terms contained in ARTICLES II and
IV.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 ET SEQ., the Occupational Safety and Health Act of
1970, 29 U.S.C. Section 651 ET SEQ., and the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Section 6901 ET SEQ., in each case including any
amendments thereto, any successor statutes, and any regulations or guidance
promulgated thereunder, and any state or local equivalent thereof.
"ENVIRONMENTAL LIEN" means a lien in favor of any Governmental Authority
for (a) any liability under Environmental, Health or Safety Requirements of Law,
or (b) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
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"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"EQUIPMENT" means all of the Borrower's present and future (i) equipment,
including, without limitation, machinery, manufacturing, distribution, selling,
data processing and office equipment, assembly systems, tools, molds, dies,
fixtures, appliances, furniture, furnishings, vehicles, vessels, aircraft,
aircraft engines, and trade fixtures, (ii) other tangible personal property
(other than the Borrower's Inventory), and (iii) any and all accessions, parts
and appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
"EQUITABLE CHARGE" means that certain Fixed and Floating Charge of even
date herewith executed by the Borrower in favor of the Agent for the benefit of
the Holders of Secured Obligations, as amended, restated, supplemented or
otherwise modified from time to time.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUIVALENT AMOUNT" of any Agreed Currency with respect to any amount of
Dollars at any date shall mean the equivalent in such Currency of such amount of
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Agent for such other Currency at 11:00 a.m.
(London time) two Business Days prior to the date on which such amount is to be
determined.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EUROCURRENCY BASE RATE" means, with respect to any Eurocurrency Rate
Advance for any specified Interest Period, either (i) the rate of interest per
annum equal to the rate for deposits in the applicable Agreed Currency in the
approximate amount of the pro rata share of the Agent of such Eurocurrency
Advance with a maturity approximately equal to such Interest Period which
appears on Telerate Page 3740 or Telerate Page 3750, as applicable, or, if there
is more than one such rate, the average of such rates rounded to the nearest
1/100 of 1%, as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period or (ii) if no such rate of interest appears on
Telerate Page 3740 or Telerate Page 3750, as applicable, for any specified
Interest Period, the rate at which deposits in the applicable Agreed Currency
are offered by the Agent to first-class banks in the London interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of the pro rata share of the
Agent of such Eurocurrency Advance and having a maturity approximately equal to
such Interest Period. The terms "Telerate Page 3740" and "Telerate Page 3750"
mean the display designated as "Page 3740" and "Page 3750", as applicable, on
the Associated Press-Dow Jones Telerate Service (or such other page as may
replace Page 3740 or Page 3750, as applicable, on the Associated Press-Dow Jones
Telerate Service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association interest rate
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settlement rates for the relevant Agreed Currency). Any Eurocurrency Base Rate
determined on the basis of the rate displayed on Telerate Page 3740 or Telerate
Page 3750 in accordance with the foregoing provisions of this subparagraph shall
be subject to corrections, if any, made in such rate and displayed by the
Associated Press-Dow Jones Telerate Service within one hour of the time when
such rate is first displayed by such service.
"EUROCURRENCY PAYMENT OFFICE" of the Agent shall mean, for each of the
Agreed Currencies, the office, branch or affiliate of the Agent, specified as
the "EUROCURRENCY PAYMENT OFFICE" for such Agreed Currency in SCHEDULE I hereto
or such other office, branch, affiliate or correspondent bank of the Agent, as
it may from time to time specify to the Borrower and each Lender as its
Eurocurrency Payment Office.
"EUROCURRENCY RATE" means, with respect to a Eurocurrency Rate Loan for the
relevant Interest Period, the Eurocurrency Base Rate applicable to such Interest
Period PLUS the then Applicable Eurocurrency Margin. The Eurocurrency Rate
shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not
such a multiple.
"EUROCURRENCY RATE ADVANCE" means an Advance which bears interest at the
Eurocurrency Rate.
"EUROCURRENCY RATE LOAN" means a Loan, or portion thereof, which bears
interest at the Eurocurrency Rate.
"EXCESS CASH FLOW" means an amount equal to the Borrower's and its
Subsidiaries' consolidated (i) EBITDA for such period, MINUS (ii) income taxes
paid in cash for such period, MINUS (iii) Capital Expenditures paid in cash
during such period, MINUS (iv) Interest Expense for such period, MINUS
(v) scheduled amortization of the principal portion of the Term Loans and
scheduled amortization of the principal portion of all other Indebtedness of the
Borrower and its Subsidiaries during such period, MINUS (vi) the increase (or
PLUS the decrease) in Working Capital during such period, in each case as
calculated in accordance with Agreement Accounting Principles. All such amounts
shall be calculated assuming that the Borrower has conducted its business in the
ordinary course and in accordance with past practices.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FINANCING" means, with respect to any Person, the issuance or sale by such
Person of any Equity Interests of such Person or any Indebtedness consisting of
debt securities of such Person.
"FIRST CHICAGO" means The First National Bank of Chicago, in its individual
capacity, and its successors.
"FIXED CHARGE COVERAGE RATIO" is defined in SECTION 7.4(A) hereof.
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"FLOATING RATE" means, for any day for any Loan, a rate per annum equal to
the Alternate Base Rate for such day, changing and as the Alternate Base Rate
changes, PLUS the then Applicable Floating Rate Margin.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
"FLOATING RATE LOAN" means a Loan, or portion thereof, which bears interest
at the Floating Rate.
"FOREIGN INCORPORATED SUBSIDIARY" means a Subsidiary of the Borrower which
is not a Domestic Incorporated Subsidiary.
"GOVERNMENTAL ACTS" is defined in SECTION 3.10(A) hereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GROSS NEGLIGENCE" means recklessness, or actions taken or omitted with
conscious indifference to or the complete disregard of consequences. Gross
Negligence does not mean the absence of ordinary care or diligence, or an
inadvertent act or inadvertent failure to act. If the term "gross negligence"
is used with respect to the Agent or any Lender or any indemnitee in any of the
other Loan Documents, it shall have the meaning set forth herein.
"GUARANTY" means each of those certain Guaranties executed from time to
time by each of the Subsidiaries of the Borrower in favor of the Agent for the
benefit of itself and the Holders of Secured Obligations, as amended, restated,
supplemented or otherwise modified from time to time, in substantially the form
of EXHIBIT J attached hereto.
"HEDGING OBLIGATIONS" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, commodity prices,
exchange rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"HOLDERS OF SECURED OBLIGATIONS" shall mean the holders of the Secured
Obligations from time to time and shall include their respective successors,
transferees and assigns.
"INDEBTEDNESS" of any Person means, without duplication, such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from property or assets now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances or other instruments, (e) Capitalized Lease Obligations, (f)
Contingent Obligations, (g) obligations with respect to letters of
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credit, (h) Hedging Obligations and (i) Off Balance Sheet Liabilities. The
amount of Indebtedness of any Person at any date shall be without duplication
(i) the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any such Contingent Obligations at
such date and (ii) in the case of Indebtedness of others secured by a Lien to
which the property or assets owned or held by such Person is subject, the lesser
of the fair market value at such date of any asset subject to a Lien securing
the Indebtedness of others and the amount of the Indebtedness secured.
"INDEMNIFICATION LETTER" means that certain Letter, dated as of February 5,
1998, issued by First Chicago in favor of National Westminster Bank PLC pursuant
to which First Chicago shall indemnify National Westminster Bank PLC for certain
amounts not to exceed in the aggregate L10,713,653.
"INDEMNIFIED MATTERS" is defined in SECTION 10.7(B) hereof.
"INDEMNITEES" is defined in SECTION 10.7(B) hereof.
"INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means (i) the Patent Security
Agreement of even date herewith executed by the Borrower in favor of the Agent
for the benefit of the Holders of Secured Obligations, (ii) the Trademark
Security Agreement of even date herewith executed by the Borrower in favor of
the Agent for the benefit of the Holders of Secured Obligations, and (iii) each
trademark, patent, copyright or other intellectual property security agreement
executed from time to time by any of the Subsidiaries of the Borrower in favor
of the Agent for the benefit of the Holders of Secured Obligations, in each case
as amended, restated, supplemented or otherwise modified from time to time.
"INTEREST EXPENSE" means, for any period, the total interest expense of the
Borrower and its consolidated Subsidiaries, whether paid or accrued (including
the interest component of Capitalized Leases, commitment and letter of credit
fees), but excluding interest expense not payable in cash (including
amortization of discount), all as determined in conformity with Agreement
Accounting Principles.
"INTEREST PERIOD" means, with respect to a Eurocurrency Rate Loan, a period
of fourteen (14) days or one (1), two (2), three (3) months or six (6) months or
such other period as the Borrower may request and the Lenders, in their
discretion, shall agree to, commencing on a Business Day selected by the
Borrower on which a Eurocurrency Rate Advance is made to Borrower pursuant to
this Agreement. Such Interest Period shall end on (but exclude) the day which
corresponds numerically to such date fourteen (14) days or one, two, three or
six months thereafter (or as agreed); PROVIDED, HOWEVER, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month. If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day, PROVIDED, HOWEVER, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"INTEREST RATE AGREEMENTS" is defined in SECTION 7.3(P) hereof.
"INVENTORY" shall mean any and all goods, including, without limitation,
goods in transit, wheresoever located, whether now owned or hereafter acquired
by the Borrower or any of its Subsidiaries, which are held for sale or lease,
furnished under any contract of service or held as raw
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materials, work in process or supplies, and all materials used or consumed in
the business of Borrower or any of its Subsidiaries, and shall include all
right, title and interest of the Borrower or any of its Subsidiaries in any
property the sale or other disposition of which has given rise to Receivables
and which has been returned to or repossessed or stopped in transit by the
Borrower or any of its Subsidiaries.
"INVESTMENT" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of any Indebtedness, Equity Interests or other
securities, or of a beneficial interest in any Indebtedness, Equity Interests or
other securities, issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"ISSUING BANKS" means First Chicago and any Lender which, at the Borrower's
request, agrees, in each such Lender's sole discretion, to become an Issuing
Bank for the purpose of issuing Letters of Credit, and their respective
successors and assigns, in each case in such Lender's separate capacity as an
issuer of Letters of Credit pursuant to SECTION 3.1. The designation of any
Lender as an Issuing Bank after the date hereof shall be subject to the prior
written consent of the Agent.
"L/C DOCUMENTS" is defined in Section 3.4 hereof.
"L/C DRAFT" means a draft drawn on an Issuing Bank pursuant to a Letter of
Credit.
"L/C INTEREST" shall have the meaning ascribed to such term in SECTION 3.6
hereof.
"L/C OBLIGATIONS" means, without duplication, an amount equal to the sum of
(i) the aggregate of the amount then available for drawing under each of the
Letters of Credit or otherwise payable in respect of the Indemnification Letter,
(ii) the face amount of all outstanding L/C Drafts corresponding to the Letters
of Credit, which L/C Drafts have been accepted by the applicable Issuing Bank,
(iii) the aggregate outstanding amount of all Reimbursement Obligations at such
time and (iv) the aggregate face amount of all Letters of Credit requested by
the Borrower but not yet issued (unless the request for an unissued Letter of
Credit has been denied).
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LETTER OF CREDIT" means the letters of credit to be issued by the Issuing
Banks pursuant to SECTION 3.1 hereof or (ii) the Indemnification Letter.
"LEVERAGE RATIO" is defined in SECTION 7.4(B) hereof.
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"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN(S)" means, with respect to a Lender, such Lender's portion of any
Advance made pursuant to SECTION 2.1 or SECTION 2.2 hereof, as applicable, and
in the case of the Swing Line Bank, any Swing Line Loan made pursuant to SECTION
2.3 hereof, and collectively all Term Loans, Revolving Loans and Swing Line
Loans, whether made or continued as or converted to Floating Rate Loans or
Eurocurrency Rate Loans.
"LOAN ACCOUNT" is defined in SECTION 2.15(F) hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the L/C Documents and all
other documents, instruments and agreements executed in connection therewith or
contemplated thereby, as the same may be amended, restated or otherwise modified
and in effect from time to time.
"MARCONI ACQUISITION" means the purchase by IFR Systems Limited, a
corporation organized under English law, of all of the "Shares" (as defined in
the Acquisition Agreement) of Marconi (UK) and the purchase by the Borrower of
all of the "Shares" (as defined in the Acquisition Agreement) of Marconi (US),
in each case, pursuant to the terms of the Acquisition Agreement as in effect on
the Closing Date and without giving any effect to any amendment or modification
thereto.
"MARCONI (UK)" means Marconi Instruments Limited, a corporation organized
under English law.
"MARCONI (US)" means Marconi Instruments Inc., a Delaware corporation.
"MARGIN STOCK" shall have the meaning ascribed to such term in Regulation
U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower, or the Borrower and its Subsidiaries,
taken as a whole, (b) the ability of the Borrower or any of its Subsidiaries to
perform their respective obligations under the Loan Documents in any material
respect, or (c) the ability of the Lenders or the Agent to enforce in any
material respect the Obligations.
"MAXIMUM EUROCURRENCY AMOUNT" means $10,000,000 or such other greater
amount as the Borrower may from time to time designate in writing to the Agent
provided such designated amount shall be agreed to by the Required Lenders.
"MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Borrower or any member of the
Controlled Group.
"NET CASH PROCEEDS" means, with respect to any Asset Sale by any Person,
(a) cash (freely convertible into Dollars) received by such Person or any
Subsidiary of such Person from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (i) provision for
all income or other taxes measured by or resulting from such Asset Sale, (ii)
payment of all brokerage commissions and
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other fees and expenses related to such Asset Sale, (iii) all amounts used to
repay Indebtedness secured by a Lien on any asset disposed of in such Asset Sale
or which is or may be required (by the express terms of the instrument governing
such Indebtedness) to be repaid in connection with such Asset Sale (including
payments made to obtain or avoid the need for the consent of any holder of such
Indebtedness), and (iv) deduction of appropriate amounts to be provided by such
Person or a Subsidiary of such Person as a reserve, in accordance with Agreement
Accounting Principles, against any liabilities associated with the assets sold
or disposed of in such Asset Sale and retained by such Person or a Subsidiary of
such Person after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale; and (b) cash payments in
respect of any other consideration received by such Person or any Subsidiary of
such Person from such Asset Sale upon receipt of such cash payments by such
Person or such Subsidiary.
"NET INCOME" means, for any period, the net earnings (or loss) after taxes
of the Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with Agreement
Accounting Principles.
"NON PRO RATA LOAN" is defined in SECTION 9.2 hereof.
"NOTES" means the Revolving Notes, Swing Line Notes and Term Notes.
"NOTICE OF ASSIGNMENT" is defined in SECTION 13.3(B) hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower to the Agent, any Lender, the Swing
Line Bank, the Arranger, any Affiliate of the Agent or any Lender, any Issuing
Bank or any Indemnitee, of any kind or nature, present or future, arising under
this Agreement, the Notes, the L/C Documents or any other Loan Document, whether
or not evidenced by any note, guaranty or other instrument, whether or not for
the payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements, paralegals' fees (in each case whether or not allowed),
and any other sum chargeable to the Borrower under this Agreement or any other
Loan Document.
"OFF BALANCE SHEET LIABILITIES" of a Person means (a) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person, (c) any liability
under any financing lease or so-called "synthetic" lease transaction, or (d) any
obligations arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheets of such Person and its
Subsidiaries.
"OTHER TAXES" is defined in SECTION 2.15(E)(ii) hereof.
"PARTICIPANTS" is defined in SECTION 13.2(A) hereof.
"PAYMENT DATE" means the 15th day of each month.
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"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERMITTED ACQUISITION" is defined in SECTION 7.3(G) hereof.
"PERMITTED EXISTING CONTINGENT OBLIGATIONS" means the Contingent
Obligations of the Borrower and its Subsidiaries identified as such on SCHEDULE
1.1.4 to this Agreement.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the Borrower
and its Subsidiaries identified as such on SCHEDULE 1.1.1 to this Agreement.
"PERMITTED EXISTING INVESTMENTS" means the Investments of the Borrower and
its Subsidiaries identified as such on SCHEDULE 1.1.2 to this Agreement.
"PERMITTED EXISTING LIENS" means the Liens on assets of the Borrower and
its Subsidiaries identified as such on SCHEDULE 1.1.3 to this Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" is defined in SECTION 7.3(A)(vii)
hereof.
"PERSON" means any individual, corporation, firm, enterprise, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company or other entity of any kind, or any
government or political subdivision or any agency, department or instrumentality
thereof.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENT" means that certain Pledge Agreement of even date
herewith executed by the Borrower in favor of the Agent for the benefit of the
Holders of Secured Obligations, as amended, restated, supplemented or otherwise
modified from time to time.
"PRO RATA SHARE" means, with respect to any Lender, (i) at any time prior
to the Closing Date, the percentage obtained by dividing (A) such Lender's
Commitments at such time (in each case, as adjusted from time to time in
accordance with the provisions of this Agreement) by (B) the sum of the
Aggregate Term Loan Commitment and the Aggregate Revolving Loan Commitment at
such time and (ii) at any time after the Closing Date, the percentage obtained
by dividing (A) the sum of such Lender's Term Loans and Revolving Loan
Commitment at such time (in each case, as adjusted from time to time in
accordance with the provisions of this Agreement) by (B) the sum of the
aggregate amount of all of the Term Loans and the Aggregate Revolving Loan
Commitment at such time; PROVIDED, HOWEVER, if all of the Commitments are
terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means
the percentage obtained by dividing (x) the sum of such Lender's Term Loans and
Revolving Loans and, in the case of the Swing Line Bank, Swing Lines Loans, by
(y) the aggregate amount of all Term Loans, Revolving Loans and Swing Line
Loans.
"PURCHASERS" is defined in SECTION 13.3(A) hereof.
"RATE OPTION" means the Eurocurrency Rate or the Floating Rate.
"RECEIVABLE(S)" means and includes all of the Borrower's presently existing
and hereafter
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arising or acquired accounts, accounts receivable, and all present and future
rights of the Borrower to payment for goods sold or leased or for services
rendered (except those evidenced by instruments or chattel paper), whether or
not they have been earned by performance, and all rights in any merchandise or
goods which any of the same may represent, and all rights, title, security and
guaranties with respect to each of the foregoing, including, without limitation,
any right of stoppage in transit.
"REGISTER" is defined in SECTION 13.3(C) hereof.
"REGULATION G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by nonbank, nonbroker lenders for the purpose of purchasing
or carrying margin stock (as defined therein).
"REGULATION T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying Margin
Stock applicable to member banks of the Federal Reserve System.
"REGULATION X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"REIMBURSEMENT OBLIGATION" is defined in SECTION 3.7 hereof.
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property but does not include any
amounts payable under Capitalized Leases of such Person.
"REPLACEMENT LENDER" is defined in SECTION 2.20 hereof.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days after
such event occurs, PROVIDED, HOWEVER, that a failure to meet the minimum funding
standards of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
"REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate,
are greater than fifty percent (50%); PROVIDED, HOWEVER, that, if any of the
Lenders shall have failed to fund its
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Pro Rata Share of any Revolving Loan requested by the Borrower, or any Swing
Line Loan as requested by the Agent, which such Lenders are obligated to fund
under the terms of this Agreement and any such failure has not been cured, then
for so long as such failure continues, "REQUIRED LENDERS" means Lenders
(excluding all Lenders whose failure to fund their respective Pro Rata Shares of
such Revolving Loans or Swing Line Loans has not been so cured) whose Pro Rata
Shares represent greater than fifty percent (50%) of the aggregate Pro Rata
Shares of such Lenders; PROVIDED FURTHER, HOWEVER, that, if the Commitments have
been terminated pursuant to the terms of this Agreement, "REQUIRED LENDERS"
means Lenders (without regard to such Lenders' performance of their respective
obligations hereunder) whose aggregate ratable shares (stated as a percentage)
of the aggregate outstanding principal balance of all Loans and L/C Obligations
are greater than fifty percent (50%).
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or permit or environmental, labor,
employment, occupational safety or health law, rule or regulation, including
Environmental, Health or Safety Requirements of Law.
"RESERVES" shall mean the maximum reserve requirement, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) with respect
to "Eurocurrency liabilities" or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurocurrency
Rate Loans is determined or category of extensions of credit or other assets
which includes loans by a non-United States office of any Lender to United
States residents.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct
or indirect, on account of any Equity Interests of the Borrower now or hereafter
outstanding, except a dividend payable solely in the Borrower's Capital Stock or
in options, warrants or other rights to purchase such Capital Stock, and
(ii) any redemption, retirement, purchase or other acquisition for value, direct
or indirect, of any Equity Interests of the Borrower or any of its Subsidiaries
now or hereafter outstanding, other than in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Borrower) of other Equity Interests of the Borrower.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount
by which the Aggregate Revolving Loan Commitment at such time exceeds the Dollar
Amount of the Revolving Credit Obligations at such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum of
(i) the outstanding principal amount of the Revolving Loans at such time, PLUS
(ii) the outstanding principal amount of the Swing Line Loans at such time, PLUS
(iii) the L/C Obligations at such time.
"REVOLVING LOAN" is defined in SECTION 2.2 hereof.
"REVOLVING LOAN COMMITMENT" means, for each Lender, the obligation of such
Lender to make Revolving Loans and to purchase participations in Letters of
Credit not exceeding the amount
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set forth on EXHIBIT A to this Agreement opposite its name thereon under the
heading "Revolving Loan Commitment" or the signature page of the assignment and
acceptance by which it became a Lender, as such amount may be modified from time
to time pursuant to the terms of this Agreement or to give effect to any
applicable assignment and acceptance.
"REVOLVING LOAN TERMINATION DATE" means February 5, 2004.
"REVOLVING NOTE" means a promissory note, in substantially the form of
EXHIBIT B-1 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Revolving Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such Revolving Note.
"RISK-BASED CAPITAL GUIDELINES" is defined in SECTION 4.2 hereof.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations and (ii) all
Hedging Obligations owing under Interest Rate Agreements to any Lender or any
affiliate of any Lender.
"SECURITY AGREEMENT" means that certain Security Agreement of even date
herewith executed by the Borrower in favor of the Agent for the benefit of the
Holders of Secured Obligations, as amended, restated, supplemented or otherwise
modified from time to time.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SOLVENT" shall mean, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and at
present fair saleable value) is equal to or in excess of the total amount
of its liabilities, including, without limitation, contingent liabilities;
and
(ii) it is then able and expects to be able to pay its debts as they
mature; and
(iii) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
With respect to contingent liabilities (such as litigation, guarantees and
pension plan liabilities), such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amount which can be reasonably be expected to become an actual or
matured liability.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"SUBSIDIARY SECURITY AGREEMENT" means that certain Security Agreement of
even date
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herewith executed by each of the Domestic Incorporated Subsidiaries of the
Borrower listed on SCHEDULE 6.8 in favor of the Agent for the benefit of the
Holders of Secured Obligations, in each case as amended, restated, supplemented
or otherwise modified from time to time.
"SWING LINE BANK" means First Chicago or any other Lender as a successor
Swing Line Bank pursuant to the terms hereof.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Bank to make
Swing Line Loans up to a maximum principal amount of $5,000,000 at any one time
outstanding.
"SWING LINE LOAN" means a Loan made available to the Borrower by the Swing
Line Bank pursuant to SECTION 2.3 hereof.
"SWING LINE NOTE" means a promissory note, in substantially the form of
EXHIBIT B-2 hereto, duly executed by the Borrower and payable to the order of
the Swing Line Bank in the amount of its Swing Line Commitment, including any
amendment, restatement, modification, renewal or replacement of such Swing Line
Note.
"TAXES" is defined in SECTION 2.15(E)(i) hereof.
"TERM LOANS" means, collectively, the Tranche A Term Loans and the Tranche
B Term Loans.
"TERM NOTES" means, collectively, the Tranche A Term Notes and the Tranche
B Term Notes.
"TERMINATION DATE" means the earlier of (a) the Revolving Loan Termination
Date, and (b) the date of termination in whole of the Aggregate Revolving Loan
Commitment pursuant to SECTION 2.6 hereof or the Commitments pursuant to SECTION
9.1 hereof.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of the Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"TRANCHE A PRO RATA SHARE" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then aggregate amount of such Lender's Revolving Loan
Commitment plus the outstanding principal balance of such Lender's Tranche A
Term Loans and the denominator of which shall be the then aggregate amount of
all Revolving Loan Commitments and the outstanding principal balance of the
Tranche A Term Loans.
20
<PAGE>
"TRANCHE A TERM LOAN" is defined in SECTION 2.1(A)(i) hereof.
"TRANCHE A TERM LOAN COMMITMENT" means, for each Lender, the obligation of
such Lender to make its Tranche A Term Loan pursuant to the terms and conditions
of this Agreement, and which shall not exceed the principal amount set forth on
EXHIBIT A to this Agreement opposite its name thereon under the heading "Tranche
A Term Loan Commitment", as such amount may be modified from time to time
pursuant to the terms hereof.
"TRANCHE A TERM LOAN LENDER" means any Lender with a Tranche A Term Loan
Commitment.
"TRANCHE A TERM LOAN TERMINATION DATE" means February 5, 2004.
"TRANCHE A TERM NOTE" means a promissory note, in substantially the form of
EXHIBIT B-3 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Tranche A Term Loan Commitment, including any
amendment, restatement, modification, renewal or replacement of such Tranche A
Term Note.
"TRANCHE B PRO RATA SHARE" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then outstanding principal balance of such Lender's Tranche B
Term Loans and the denominator of which shall be the then outstanding principal
balance of all Tranche B Term Loans.
"TRANCHE B TERM LOAN" is defined in SECTION 2.1(A)(ii) hereof.
"TRANCHE B TERM LOAN COMMITMENT" means, for each Lender, the obligation of
such Lender to make its Tranche B Term Loan pursuant to the terms and conditions
of this Agreement, and which shall not exceed the principal amount set forth on
EXHIBIT A to this Agreement opposite its name thereon under the heading "Tranche
B Term Loan Commitment", as such amount may be modified from time to time
pursuant to the terms hereof.
"TRANCHE B TERM LOAN LENDER" means any Lender with a Tranche B Term Loan
Commitment.
"TRANCHE B TERM LOAN TERMINATION DATE" means February 5, 2005.
"TRANCHE B TERM NOTE" means a promissory note, in substantially the form of
EXHIBIT B-4 hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Tranche B Term Loan Commitment, including any
amendment, restatement, modification, renewal or replacement of such Tranche B
Term Note.
"TRANSACTION DOCUMENTS" means the Loan Documents and the documents executed
and delivered by the Borrower or any of its Subsidiaries in connection with the
Marconi Acquisition, including, without limitation, the Acquisition Agreement.
"TRANSFEREE" is defined in SECTION 13.5 hereof.
"TYPE" means, with respect to any Loan, its nature as a Floating Rate Loan
or a Eurocurrency Rate Loan.
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<PAGE>
"UNFUNDED LIABILITIES" means (i) in the case of Single Employer Plans, the
amount (if any) by which the present value of all vested nonforfeitable benefits
under all Single Employer Plans exceeds the fair market value of all such Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plans, and (ii) in the case of Multiemployer Plans, the
withdrawal liability that would be incurred by the Controlled Group if all
members of the Controlled Group completely withdrew from all Multiemployer
Plans.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"WORKING CAPITAL" means, as at any date of determination, the excess, if
any, of (i) the Borrower's consolidated current assets, except cash and Cash
Equivalents, over (ii) the Borrower's consolidated current liabilities, except
current maturities of long-term debt and Revolving Credit Obligations as of such
date and all accrued interest as of such date.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with generally accepted accounting
principles in existence as of the date hereof.
1.2 REFERENCES. The existence throughout the Agreement of references to
the Borrower's Subsidiaries is for a matter of convenience only. Any references
to Subsidiaries of the Borrower set forth herein shall (i) with respect to
representations and warranties which deal with historical matters be deemed to
include the Borrower and its Subsidiaries, together with the business acquired
pursuant to the Marconi Acquisition, and (ii) shall not in any way be construed
as consent by the Agent or any Lender to the establishment, maintenance or
acquisition of any Subsidiary, except as may otherwise be permitted hereunder.
1.3 SUPPLEMENTAL DISCLOSURE. At any time at the request of the Agent and
at such additional times as the Borrower determines, the Borrower shall
supplement each schedule or representation herein or in the other Loan Documents
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such schedule or as an exception to such representation or which is
necessary to correct any information in such schedule or representation which
has been rendered inaccurate thereby. Unless any such supplement to such
schedule or representation discloses the existence or occurrence of events,
facts or circumstances which are not prohibited by the terms of this Agreement
or any other Loan Documents, such supplement to such schedule or representation
shall not be deemed an amendment thereof unless expressly consented to in
writing by Agent and the Required Lenders, and no such amendments, except as the
same may be consented to in a writing which expressly includes a waiver, shall
be or be deemed a waiver by the Agent or any Lender of any Default disclosed
therein.
ARTICLE II: THE TERM LOAN AND REVOLVING LOAN FACILITIES
2.1. TERM LOANS. (A) (i) AMOUNT OF TRANCHE A TERM LOANS. Subject to the
terms and conditions set forth in this Agreement, each Tranche A Term Loan
Lender on the Closing Date severally and not jointly agrees to make on the
Closing Date, term loans, in Dollars, to the Borrower in an aggregate amount
equal to such Lender's Tranche A Term Loan Commitment (each individually, a
"TRANCHE A TERM LOAN" and, collectively, the "TRANCHE A TERM LOANS"). All Term
Loans shall be made by the Lenders on the Closing Date simultaneously and
proportionately to
22
<PAGE>
their respective Tranche A Pro Rata Shares, it being understood that no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Tranche A Term Loan hereunder nor shall the Tranche A
Term Loan Commitment of any Lender be increased or decreased as a result of any
such failure.
(ii) AMOUNT OF TRANCHE B TERM LOANS. Subject to the terms and conditions
set forth in this Agreement, each Tranche B Term Loan Lender on the Closing Date
severally and not jointly agrees to make on the Closing Date, term loans, in
Dollars, to the Borrower in an amount equal to such Lender's Tranche B Term Loan
Commitment (each individually, a "TRANCHE B TERM LOAN" and, collectively, the
"TRANCHE B TERM LOANS"). All Term Loans shall be made by the Lenders on the
Closing Date simultaneously and proportionately to their respective Tranche B
Pro Rata Shares, it being understood that no Lender shall be responsible for any
failure by any other Lender to perform its obligation to make any Tranche B Term
Loan hereunder nor shall the Tranche B Term Loan Commitment of any Lender be
increased or decreased as a result of any such failure.
(B) BORROWING/CONVERSION/CONTINUATION NOTICE. The Borrower shall deliver
to the Agent a Borrowing/Conversion/Continuation Notice, signed by it, on the
Closing Date. Such Borrowing/ Conversion/Continuation Notice shall specify
(i) the aggregate amount of the Tranche A Term Loans and Tranche B Term Loans
being requested and (ii) instructions for the disbursement of proceeds of such
Term Loans. The Term Loans shall initially be Floating Rate Loans and
thereafter may be continued as Floating Rate Loans or converted into
Eurocurrency Rate Loans in the manner provided in SECTION 2.10 and subject to
the other conditions and limitations therein set forth and set forth in this
ARTICLE II. Any Borrowing/Conversion/Continuation Notice given pursuant to this
SECTION 2.1(B) shall be irrevocable.
(C) MAKING OF TERM LOANS. Promptly after receipt of the
Borrowing/Conversion/ Continuation Notice under SECTION 2.1(B) in respect of
the Term Loans, the Agent shall notify each Lender by telex or telecopy, or
other similar form of transmission, of the proposed Advance. Each Lender shall
deposit an amount equal to its Tranche A Pro Rata Share of the Tranche A Term
Loans and its Tranche B Pro Rata Share of the Tranche B Term Loans, as
applicable, with the Agent at its office in Chicago, Illinois, in immediately
available funds, on the Closing Date, as specified in the
Borrowing/Conversion/Continuation Notice. Subject to the fulfillment of the
conditions precedent set forth in SECTIONS 5.1 and 5.2, as applicable, the Agent
shall make the proceeds of such amounts received by it available to the Borrower
at the Agent's office in Chicago, Illinois on such date and shall disburse such
proceeds in accordance with the Borrower's disbursement instructions set forth
in such Borrowing/Conversion/Continuation Notice. The failure of any Lender to
deposit the amount described above with the Agent on such date shall not relieve
any other Lender of its obligations hereunder to make its Term Loan on such
date.
(D) REPAYMENT OF THE TRANCHE A TERM LOANS. (i) The Tranche A Term Loans
shall be repaid in twenty-three (23) consecutive quarterly installments, payable
on the last Business Day of each fiscal quarter of the Borrower, commencing on
September 30, 1998 and continuing thereafter until the Tranche A Term Loan
Termination Date, and the Tranche A Term Loans shall be permanently reduced by
the amount of each installment on the date payment thereof is made hereunder.
The installments shall be in the aggregate amounts set forth below:
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<PAGE>
<TABLE>
<CAPTION>
TRANCHE A TERM LOAN
INSTALLMENT DATE INSTALLMENT AMOUNT
---------------- --------------------
<S> <C>
September 30, 1998 $ 750,000
December 31, 1998 $ 750,000
March 31, 1999 $ 750,000
June 30, 1999 $ 750,000
September 30, 1999 $1,000,000
December 31, 1999 $1,000,000
March 31, 2000 $1,000,000
June 30, 2000 $1,000,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $2,500,000
December 31, 2001 $2,500,000
March 31, 2002 $2,500,000
June 30, 2002 $2,500,000
September 30, 2002 $3,000,000
December 31, 2002 $3,000,000
March 31, 2003 $3,000,000
June 30, 2003 $3,000,000
September 30, 2003 $5,333,333
December 31, 2003 $5,333,333
Tranche A Term Loan
Termination Date $5,333,334
</TABLE>
Notwithstanding the foregoing, the final installment shall be in the amount of
the then outstanding principal balance of the Tranche A Term Loans. In
addition, the then outstanding principal balance of the Tranche A Term Loans, if
any, shall be due and payable on the Tranche A Term Loan Termination Date. No
installment of any Tranche A Term Loan shall be reborrowed once repaid.
(F) REPAYMENT OF THE TRANCHE B TERM LOANS. (i) The Tranche B Term Loans
shall be repaid in twenty-seven (27) consecutive quarterly installments, payable
on the last Business Day of each fiscal quarter of the Borrower, commencing on
September 30, 1998, and continuing thereafter until the Tranche B Term Loan
Termination Date, and the Tranche B Term Loans shall be permanently reduced by
the amount of each installment on the date payment thereof is made hereunder.
The installments shall be in the aggregate amounts set forth below:
<TABLE>
<CAPTION>
TRANCHE B TERM LOAN
INSTALLMENT DATE INSTALLMENT AMOUNT
---------------- ------------------
<S> <C>
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<PAGE>
September 30, 1998 $ 125,000
December 31, 1998 $ 125,000
March 31, 1999 $ 125,000
June 30, 1999 $ 125,000
September 30, 1999 $ 125,000
December 31, 1999 $ 125,000
March 31, 2000 $ 125,000
June 30, 2000 $ 125,000
September 30, 2000 $ 125,000
December 31, 2000 $ 125,000
March 31, 2001 $ 125,000
June 30, 2001 $ 125,000
September 30, 2001 $ 125,000
December 31, 2001 $ 125,000
March 31, 2002 $ 125,000
June 30, 2002 $ 125,000
September 30, 2002 $ 125,000
December 31, 2002 $ 125,000
March 31, 2003 $ 125,000
June 30, 2003 $ 125,000
September 30, 2003 $ 125,000
December 31, 2003 $ 125,000
March 31, 2004 $ 5,937,500
June 30, 2004 $ 5,937,500
September 30, 2004 $ 5,937,500
December 31, 2004 $ 5,937,500
Tranche B Term Loan
Termination Date $23,500,000
</TABLE>
Notwithstanding the foregoing, the final installment shall be in the amount of
the then outstanding principal balance of the Tranche B Term Loans. In
addition, the then outstanding principal balance of the Tranche B Term Loans, if
any, shall be due and payable on the Tranche B Term Loan Termination Date. No
installment of any Tranche B Term Loan shall be reborrowed once repaid.
(G) In addition to the scheduled payments on the Term Loans, the Borrower
(a) may make the voluntary prepayments described in SECTION 2.5(A) for credit
against the scheduled payments on the Term Loans pursuant to SECTION 2.5(A) and
(b) shall make the mandatory prepayments prescribed in SECTION 2.5(B) for credit
against the scheduled payments on the Term Loans pursuant to SECTION 2.5(B).
2.2 REVOLVING LOANS. Upon the satisfaction of the conditions precedent
set forth in SECTIONS 5.1 and 5.2, as applicable, from and including the date of
this Agreement and prior to the
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<PAGE>
Termination Date, each Lender severally and not jointly agrees, on the terms and
conditions set forth in this Agreement, to make revolving loans to the Borrower
from time to time, in an Agreed Currency, in a Dollar Amount not to exceed such
Lender's Tranche A Pro Rata Share of Revolving Credit Availability at such time
(each individually, a "REVOLVING LOAN" and, collectively, the "REVOLVING
LOANS"); PROVIDED, HOWEVER, at no time shall the Dollar Amount of the Revolving
Credit Obligations exceed the Aggregate Revolving Loan Commitment. Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow
Revolving Loans at any time prior to the Termination Date; PROVIDED, FURTHER,
HOWEVER, that upon giving effect to each Advance, the aggregate outstanding
principal Dollar Amount of all Eurocurrency Rate Advances and L/C Obligations in
Agreed Currencies other than Dollars (other than in respect of the
Indemnification Letter) shall not exceed the Maximum Eurocurrency Amount. For
so long as the aggregate outstanding Dollar Amount of Advances PLUS the L/C
Obligations is less than ninety-five percent (95%) of the Aggregate Revolving
Loan Commitment, the Dollar Amount of each Eurocurrency Rate Advance and Letter
of Credit in an Agreed Currency other than Dollars for all purposes under this
Agreement (other than SECTION 2.21 shall be the Dollar Amount thereof as of the
date such Eurocurrency Rate Advance was made or Letter of Credit was issued.
For so long as the aggregate outstanding Dollar Amount of Advances PLUS the L/C
Obligations is equal to or greater than ninety-five percent (95%) of the
Aggregate Revolving Loan Commitment, the Agent shall determine the Dollar Amount
of all Eurocurrency Rate Advances and Letters of Credit in Agreed Currencies
other than Dollars as of the first Business Day in each week, and the
availability of Loans and Letters of Credit under this Agreement shall be
determined on the basis of such Dollar Amount most recently determined. The
Revolving Loans made on the Closing Date shall initially be Floating Rate Loans
and thereafter may be continued as Floating Rate Loans or converted into
Eurocurrency Rate Loans in the manner provided in SECTION 2.10 and subject to
the other conditions and limitations therein set forth and set forth in this
ARTICLE II. On the Termination Date, the Borrower shall repay in full the
outstanding principal balance of the Revolving Loans. Each Advance under this
SECTION 2.2 shall consist of Revolving Loans made by each Lender ratably in
proportion to such Lender's respective Tranche A Pro Rata Share.
2.3 SWING LINE LOANS. (A) AMOUNT OF SWING LINE LOANS. Upon the
satisfaction of the conditions precedent set forth in SECTION 5.1 and 5.2, as
applicable, from and including the date of this Agreement and prior to the
Termination Date, the Swing Line Bank agrees, on the terms and conditions set
forth in this Agreement, to make swing line loans to the Borrower from time to
time, in Dollars, in an amount not to exceed the Swing Line Commitment (each,
individually, a "SWING LINE LOAN" and collectively, the "SWING LINE LOANS");
PROVIDED, HOWEVER, at no time shall the Dollar Amount of the Revolving Credit
Obligations exceed the Aggregate Revolving Loan Commitment; and PROVIDED,
FURTHER, that at no time shall the sum of (a) the outstanding amount of the
Swing Line Loans, PLUS (b) the outstanding amount of Revolving Loans made by the
Swing Line Bank pursuant to SECTION 2.2 (after giving effect to any concurrent
repayment of Loans, exceed the Swing Line Bank's Revolving Loan Commitment at
such time. Subject to the terms of this Agreement, the Borrower may borrow,
repay and reborrow Swing Line Loans at any time prior to the Termination Date.
(B) BORROWING/CONVERSION/CONTINUATION NOTICE. The Borrower shall deliver
to the Agent and the Swing Line Bank a Borrowing/Conversion/Continuation Notice,
signed by it, not later than 2:00 p.m. (Chicago time) on the Borrowing Date of
each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date
shall be a Business Day and which may be the same date as the date the
Borrowing/Conversion/Continuation Notice is given), and (ii) the aggregate
amount of the requested Swing Line Loan which shall be an amount not less than
$100,000. The Swing Line Loans shall at all times be Floating Rate Loans.
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<PAGE>
(C) MAKING OF SWING LINE LOANS. Promptly after receipt of the
Borrowing/Conversion/ Continuation Notice under SECTION 2.3(B) in respect of
Swing Line Loans, the Agent shall notify each Lender by telex or telecopy, or
other similar form of transmission, of the requested Swing Line Loan. Not later
than 3:00 p.m. (Chicago time) on the applicable Borrowing Date, the Swing Line
Bank shall make available its Swing Line Loan, in funds immediately available in
Chicago to the Agent at its address specified pursuant to ARTICLE XIV. The
Agent will promptly make the funds so received from the Swing Line Bank
available to the Borrower on the Borrowing Date at the Agent's aforesaid
address.
(D) REPAYMENT OF SWING LINE LOANS. The Swing Line Loans shall be evidenced
by the Swing Line Note, and each Swing Line Loan shall be paid in full by the
Borrower on or before the fifth Business Day after the Borrowing Date for such
Swing Line Loan. The Borrower may at any time pay, without penalty or premium,
all outstanding Swing Line Loans or, in a minimum amount of $100,000 and
increments of $100,000 in excess thereof, any portion of the outstanding Swing
Line Loans, upon notice to the Agent and the Swing Line Bank. In addition, the
Agent (i) may at any time in its sole discretion with respect to any outstanding
Swing Line Loan, or (ii) shall on the fifth Business Day after the Borrowing
Date of any Swing Line Loan, require each Lender (including the Swing Line Bank)
to make a Revolving Loan in the amount of such Lender's Pro Rata Share of such
Swing Line Loan, for the purpose of repaying such Swing Line Loan. Not later
than 2:00 p.m. (Chicago time) on the date of any notice received pursuant to
this SECTION 2.3(D), each Lender shall make available its required Revolving
Loan or Revolving Loans, in funds immediately available in Chicago to the Agent
at its address specified pursuant to ARTICLE XIV. Revolving Loans made pursuant
to this SECTION 2.3(D) shall initially be Floating Rate Loans and thereafter may
be continued as Floating Rate Loans or converted into Eurocurrency Rate Loans in
the manner provided in SECTION 2.10 and subject to the other conditions and
limitations therein set forth and set forth in this ARTICLE II. Unless a Lender
shall have notified the Swing Line Bank, prior to its making any Swing Line
Loan, that any applicable condition precedent set forth in SECTIONS 5.1 and 5.2,
as applicable, had not then been satisfied, such Lender's obligation to make
Revolving Loans pursuant to this SECTION 2.3(D) to repay Swing Line Loans shall
be unconditional, continuing, irrevocable and absolute and shall not be affected
by any circumstances, including, without limitation, (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against the Agent, the Swing Line Bank or any other Person, (b) the occurrence
of continuance of a Default or Unmatured Default, (c) any adverse change in the
condition (financial or otherwise) of the Borrower, or (d) any other
circumstances, happening or event whatsoever. In the event that any Lender
fails to make payment to the Agent of any amount due under this SECTION 2.3(D),
the Agent shall be entitled to receive, retain and apply against such obligation
the principal and interest otherwise payable to such Lender hereunder until the
Agent receives such payment from such Lender or such obligation is otherwise
fully satisfied. In addition to the foregoing, if for any reason any Lender
fails to make payment to the Agent of any amount due under this SECTION 2.3(D),
such Lender shall be deemed, at the option of the Agent, to have unconditionally
and irrevocably purchased from the Swing Line Bank, without recourse or
warranty, an undivided interest and participation in the applicable Swing Line
Loan in the amount of such Revolving Loan, and such interest and participation
may be recovered from such Lender together with interest thereon at the Federal
Funds Effective Rate for each day during the period commencing on the date of
demand and ending on the date such amount is received. On the Termination Date,
the Borrower shall repay in full the outstanding principal balance of the Swing
Line Loans.
2.4 RATE OPTIONS FOR ALL ADVANCES; MAXIMUM INTEREST PERIODS. The Swing
Line Loans shall be Floating Rate Advances at all times. The Revolving Loans
and Term Loans may be Floating Rate
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<PAGE>
Advances or Eurocurrency Rate Advances, or a combination thereof, selected by
the Borrower in accordance with SECTION 2.10. The Borrower may select, in
accordance with SECTION 2.10, Rate Options and Interest Periods applicable to
portions of the Revolving Loans and the Term Loans; PROVIDED that there shall be
no more than six (6) Interest Periods in effect with respect to all of the Loans
at any time. Notwithstanding anything herein to the contrary, the Borrower may
not select the Eurocurrency Rate with Interest Periods longer than fourteen (14)
days for any Loans without the Agent's consent during the period from the
Closing Date through the earlier to occur of (i) the date that is ninety (90)
days after the Closing Date and (ii) the date on which the Arranger notifies the
Borrower that the primary syndication of the Loans and Commitments has been
completed (the "SYNDICATION PERIOD"). The Swing Line Loans shall at all times
be Floating Rate Loans.
2.5 OPTIONAL PAYMENTS; MANDATORY PREPAYMENTS.
(A) OPTIONAL PAYMENTS. The Borrower may from time to time and at any time
repay or prepay, without penalty or premium all or any part of outstanding
Floating Rate Advances; PROVIDED, that the Borrower may not so prepay Floating
Rate Advances consisting of Term Loans unless it shall have provided at least
one Business Day's written notice to the Agent of such prepayment. Any optional
prepayment of the Term Loans must be applied either (i) ratably to the Tranche A
Term Loans and the Tranche B Term Loans or (ii) entirely to the Tranche B Term
Loans. Eurocurrency Rate Advances may be voluntarily repaid or prepaid prior to
the last day of the applicable Interest Period, subject to the indemnification
provisions contained in SECTION 4.4, PROVIDED, that the Borrower may not so
prepay Eurocurrency Rate Advances unless it shall have provided at least five
Business Days' written notice to the Agent of such prepayment. Unless the
aggregate outstanding principal balance of the Term Loans is to be prepaid in
full, voluntary prepayments of the Term Loans shall be in an aggregate minimum
amount of $500,000 and integral multiples of $100,000 in excess of that amount,
and shall be applied to each of the then remaining installments payable
thereunder, in the inverse order of maturity; PROVIDED, that optional
prepayments of Eurocurrency Rate Advances made pursuant to SECTION 2.2 shall be
for the entire amount of the outstanding Eurocurrency Rate Advance.
(B) MANDATORY PREPAYMENTS.
(i) MANDATORY PREPAYMENTS OF TERM LOANS.
(a) Upon the consummation of any Asset Sale or Financing by the
Borrower or any Subsidiary of the Borrower, other than those Asset Sales
permitted pursuant to SECTION 7.3(B)(i), (ii) and (iii), except to the
extent that the Net Cash Proceeds of such Asset Sale, when combined with
the Net Cash Proceeds of all such Asset Sales during the immediately
preceding twelve-month period, do not exceed $5,000,000 or the Approximate
Equivalent Amount of any Agreed Currency other than Dollars, and except as
provided in the second sentence of this SECTION 2.5(B)(i)(a), within three
(3) Business Days after the Borrower's or any of its Subsidiaries'
(i) receipt of any Net Cash Proceeds from any such Asset Sale or Financing,
or (ii) conversion to cash or Cash Equivalents of non-cash proceeds
(whether principal or interest and including securities, release of escrow
arrangements or lease payments) received from any Asset Sale or Financing,
the Borrower shall make a mandatory prepayment of the Obligations in an
amount equal to one hundred percent (100%) of such Net Cash Proceeds or
such proceeds converted from non-cash to cash or Cash Equivalents. Net
Cash Proceeds of Asset Sales with respect to which the Borrower shall have
given the Agent written notice of its intention to replace the assets
within six (6) months, in the case of a sale of Equipment, or twelve (12)
months, in the case of a sale of real property, following
28
<PAGE>
such Asset Sale shall not be subject to the provisions of the first
sentence of this SECTION 2.5(B)(i)(a) unless and to the extent that such
applicable period shall have expired without such replacement having been
made.
(b) Simultaneously with the delivery of the annual audited financial
statements required to be delivered pursuant to SECTION 7.1(A)(ii) for each
fiscal year beginning with the fiscal year ending June 30, 1999, the
Borrower shall calculate Excess Cash Flow for such fiscal year and shall
make a mandatory prepayment of the Obligations, payable not later than the
earlier of ten (10) days after such financial statements and calculation
are delivered or one hundred (100) days after the end of such fiscal year,
in an amount equal to seventy-five percent (75%) of such Excess Cash Flow.
(c) If at any time, (x) the Dollar Amount of the Revolving Credit
Obligations exceeds 105% of the Aggregate Revolving Loan Commitment or
(y) the Dollar Amount of all Eurocurrency Rate Loans and L/C Obligations in
Agreed Currencies other than Dollars (other than in respect of the
Indemnification Letter) exceeds 105% of the Maximum Eurocurrency Amount
(utilizing the exchange rates determined in accordance with SECTION 2.2),
the Borrower for the ratable benefit of the Lenders shall immediately
prepay Loans (to be applied to such Loans as the Borrower shall direct at
the time of such payment) in an aggregate amount such that after giving
effect thereto (A) the Dollar Amount of the Revolving Credit Obligations is
less than or equal to the Aggregate Revolving Loan Commitments and (B) the
Dollar Amount of all Eurocurrency Rate Loans and L/C Obligations in Agreed
Currencies other than Dollars is less than or equal to the Maximum
Eurocurrency Amount (other than in respect of the Indemnification Letter).
(d) Nothing in this SECTION 2.5(B)(i) shall be construed to
constitute the Lenders' consent to any transaction referred to in CLAUSE
(a) above which is not expressly permitted by the terms of this Agreement.
(e) Each mandatory prepayment required by CLAUSES (a) and (b) of this
SECTION 2.5(B) shall be referred to herein as a "Designated Prepayment."
Designated Prepayments shall be allocated and applied to the Obligations as
follows:
(I) the amount of each Designated Prepayment shall be
applied ratably to the Tranche A Term Loans and the Tranche B
Term Loans to each of the then remaining installments payable
under such Term Loans in the inverse order of maturity; and
(II) following the payment in full of the Term Loans, the
amount of each Designated Prepayment shall be applied to repay
Revolving Loans (but shall reduce Revolving Loan Commitments only
at the option of the Required Lenders) and following the payment
in full of the Revolving Loans, the amount of each Designated
Prepayment shall be applied first to interest on the
Reimbursement Obligations, then to principal on the Reimbursement
Obligations, then to fees on account of Letters of Credit and
then, to the extent any L/C Obligations are contingent, deposited
with the Agent as cash collateral in respect of such L/C
Obligations.
(e) Any Tranche B Term Loan Lender may decline any Designated
Prepayment attributable to an Asset Sale or to Excess Cash Flow, in which
case the amount declined will
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<PAGE>
be applied pro rata to each of the then remaining installments of the
Tranche A Term Loans in the inverse order of maturity.
(f) On the date any Designated Prepayment is received by the Agent,
such prepayment shall be applied first to Floating Rate Loans and to any
Eurocurrency Rate Loans maturing on such date and then to subsequently
maturing Eurocurrency Rate Loans in order of maturity.
(ii) MANDATORY PREPAYMENTS OF REVOLVING LOANS. In addition to repayments
under SECTION 2.5(B)(i)(d)(ii), if at any time and for any reason the Dollar
Amount of the Revolving Credit Obligations are greater than the Aggregate
Revolving Loan Commitment, the Borrower shall immediately make a mandatory
prepayment of the Obligations in an amount equal to such excess. In addition,
if the Dollar Amount of L/C Obligations outstanding at any time is greater than
the Aggregate Revolving Loan Commitment at such time MINUS the sum of the
outstanding principal Dollar Amount of the Revolving Loans at such time and the
outstanding principal amount of the Swing Line Loans at such time, the Borrower
shall deposit cash collateral with the Agent in an amount in Dollars equal to
such excess.
(iii) Subject to the preceding provisions of this SECTION 2.5(B), all of
the mandatory prepayments made under this SECTION 2.5(B) shall be applied first
to Floating Rate Loans and to any Eurocurrency Rate Loans maturing on such date
and then to subsequently maturing Eurocurrency Rate Loans in order of maturity.
2.6 REDUCTION OF COMMITMENTS. The Borrower may permanently reduce the
Aggregate Revolving Loan Commitment in whole, or in part ratably among the
Lenders, in an aggregate minimum amount of $1,000,000 with respect to each such
Commitment and integral multiples of $100,000 in excess of that amount with
respect to each such Commitment (unless the Aggregate Revolving Loan Commitment
is reduced in whole), upon at least five (5) Business Day's written notice to
the Agent, which notice shall specify the amount of any such reduction;
PROVIDED, HOWEVER, that the amount of the Aggregate Revolving Loan Commitment
may not be reduced below the aggregate principal Dollar Amount of the
outstanding Revolving Credit Obligations. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
2.7 METHOD OF BORROWING. Not later than 2:00 p.m. (Chicago time) on each
Borrowing Date, each Lender shall make available its Revolving Loan or Term
Loan, in immediately available funds in the Agreed Currency to the Agent at its
address specified pursuant to ARTICLE XIV, unless the Agent has notified the
Lenders that such Loan is to be made available to the Borrower at the Agent's
Eurocurrency Payment Office, in which case each Lender shall make available its
Loan or Loans, in funds immediately available to the Agent at its Eurocurrency
Payment Office, not later than 1:00 p.m. (local time in the city of the Agent's
Eurocurrency Payment Office) in the Agreed Currency designated by the Agent.
The Agent will promptly make the funds so received from the Lenders available to
the Borrower at the Agent's aforesaid address.
2.8 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES. The
Borrower shall select the Type of Advance and, in the case of each Eurocurrency
Rate Advance, the Interest Period and Agreed Currency applicable to each Advance
from time to time. The Borrower shall give the Agent irrevocable notice in
substantially the form of EXHIBIT C hereto (a) "BORROWING/CONVERSION/
CONTINUATION NOTICE" not later than 10:00 a.m. (Chicago time) (a) on or before
the Borrowing Date of each Floating Rate Advance, (b) three Business Days before
the Borrowing Date for each
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Eurocurrency Rate Advance to be made in Dollars, and (c) four Business Days
before the Borrowing Date for each Eurocurrency Rate Advance to be made in any
Agreed Currency other than Dollars, specifying: (i) the Borrowing Date (which
shall be a Business Day) of such Advance; (ii) the aggregate amount of such
Advance; (iii) the Type of Advance selected; and (iv) in the case of each
Eurocurrency Rate Advance, the Interest Period and Agreed Currency applicable
thereto. The Borrower shall select Interest Periods so that, to the best of the
Borrower's knowledge, it will not be necessary to prepay all or any portion of
any Eurocurrency Rate Advance prior to the last day of the applicable Interest
Period in order to make mandatory prepayments as required pursuant to the terms
hereof. Each Floating Rate Advance and all Obligations other than Loans shall
bear interest from and including the date of the making of such Advance, in the
case of Loans, and the date such Obligation is due and owing in the case of such
other Obligations, to (but not including) the date of repayment thereof at the
Floating Rate, changing when and as such Floating Rate changes. Changes in the
rate of interest on that portion of any Advance maintained as a Floating Rate
Loan will take effect simultaneously with each change in the Alternate Base
Rate. Each Eurocurrency Rate Advance shall bear interest from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined as applicable
to such Eurocurrency Rate Advance.
2.9 MINIMUM AMOUNT OF EACH ADVANCE. Each Advance (other than an Advance
to repay Swing Line Loans or a Reimbursement Obligation) shall be in the minimum
amount of $1,000,000 or the Approximate Equivalent Amount of any Agreed Currency
other than Dollars (and in multiples of $100,000 or the Approximate Equivalent
Amount of any Agreed Currency other than Dollars if in excess thereof),
PROVIDED, HOWEVER, that any Floating Rate Advance may be in the amount of the
unused Aggregate Revolving Loan Commitment.
2.10 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR CONVERSION AND
CONTINUATION OF ADVANCES.
(A) RIGHT TO CONVERT. The Borrower may elect from time to time, subject
to the provisions of SECTION 2.4 and this SECTION 2.10, to convert all or any
part of a Loan of any Type into any other Type or Types of Loans; PROVIDED that
any conversion of any Eurocurrency Rate Advance shall be made on, and only on,
the last day of the Interest Period applicable thereto.
(B) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans are
converted into Eurocurrency Rate Loans. Eurocurrency Rate Loans shall continue
as Eurocurrency Rate Loans until the end of the then applicable Interest Period
therefor, at which time such Eurocurrency Rate Loans shall be automatically
converted into Floating Rate Loans unless the Borrower shall have given the
Agent notice in accordance with SECTION 2.10(D) requesting that, at the end of
such Interest Period, such Eurocurrency Rate Loans continue as a Eurocurrency
Rate Loan. Unless a Borrowing/Conversion/ Continuation Notice shall have timely
been given in accordance with the terms of this SECTION 2.10, Eurocurrency Rate
Advances in an Agreed Currency other than Dollars shall automatically continue
as Eurocurrency Rate Advances in the same Agreed Currency with an Interest
Period of one (1) month.
(C) NO CONVERSION POST-DEFAULT OR POST-UNMATURED DEFAULT. Notwithstanding
anything to the contrary contained in SECTION 2.10(A) or SECTION 2.10(B), no
Loan may be converted into or continued as a Eurocurrency Rate Loan (except with
the consent of the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing.
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(D) BORROWING/CONVERSION/CONTINUATION NOTICE. The Borrower shall give the
Agent irrevocable notice (a "BORROWING/CONVERSION/CONTINUATION NOTICE") of each
conversion of a Floating Rate Loan into a Eurocurrency Rate Loan or continuation
of a Eurocurrency Rate Loan not later than 10:00 a.m. (Chicago time) (x) three
Business Days prior to the date of the requested conversion or continuation with
respect to any Loan to be converted or continued as a Eurocurrency Rate Loan in
Dollars and (y) four Business Days prior to the date of the requested conversion
or continuation with respect to any Loan to be converted or continued as a
Eurocurrency Rate Loan in an Agreed Currency other than Dollars, specifying:
(1) the requested date (which shall be a Business Day) of such conversion or
continuation; (2) the amount and Type of the Loan to be converted or continued;
and (3) the amount of Eurocurrency Rate Loan(s) into which such Loan is to be
converted or continued, the Agreed Currency and the duration of the Interest
Period applicable thereto.
(E) Notwithstanding anything herein to the contrary, Eurocurrency Rate
Advances in an Agreed Currency may be converted and/or continued as Eurocurrency
Advances only in the same Agreed Currency.
2.11 DEFAULT RATE. After the occurrence and during the continuance of a
Default, at the option of the Agent or at the direction of the Required Lenders,
the interest rate(s) applicable to the Obligations and to the fees payable under
SECTION 3.8 with respect to Letters of Credit shall be increased by two percent
(2.0%) per annum above the Floating Rate or Eurocurrency Rate, as applicable.
2.12 METHOD OF PAYMENT. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to ARTICLE XIV in immediately available funds with respect to Advances
or other Obligations denominated in Dollars and (ii) at the Agent's Eurocurrency
Payment Office in immediately available funds with respect to any Advance or
other Obligations denominated in an Agreed Currency other than Dollars, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by 2:00 p.m. (Chicago time) on the date when due and shall be made
ratably among the Lenders (unless such amount is not to be shared ratably in
accordance with the terms hereof). Each Advance shall be repaid or prepaid in
the Agreed Currency in which it was made in the amount borrowed and interest
payable thereon shall also be paid in such Currency. Each payment delivered to
the Agent for the account of any Lender shall be delivered promptly by the Agent
to such Lender in the same type of funds which the Agent received at its address
specified pursuant to ARTICLE XIV or at any Lending Installation specified in a
notice received by the Agent from such Lender. The Borrower authorizes the
Agent to charge the account of the Borrower maintained with First Chicago for
each payment of principal, interest and fees as it becomes due hereunder. Each
reference to the Agent in this SECTION 2.12 shall also be deemed to refer, and
shall apply equally, to each Issuing Bank, in the case of payments required to
be made by the Borrower to any Issuing Bank pursuant to ARTICLE III.
Notwithstanding the foregoing provisions of this Section, if, after the making
of any Advance in any currency other than Dollars, currency control or exchange
regulations are imposed in the country which issues such Agreed Currency with
the result that different types of such Agreed Currency (the "NEW CURRENCY") are
introduced and the type of currency in which the Advance was made (the "ORIGINAL
CURRENCY") no longer exists or the Borrower is not able to make payment to the
Agent for the account of the Lenders in such Original Currency, then all
payments to be made by the Borrower hereunder or under the Notes in such
currency shall be made to the Agent in such amount and such type of the New
Currency or Dollars as shall be equivalent to the amount of such payment
otherwise due hereunder or under the Notes in the Original Currency, it being
the intention of the parties hereto that the Borrower take all risks of the
imposition of any such currency control or exchange regulations. In addition,
notwithstanding the
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<PAGE>
foregoing provisions of this Section, if, after the making of any Advance in any
currency other than Dollars, the Borrower is not able to make payment to the
Agent for the account of the Lenders in the type of currency in which such
Advance was made because of the imposition of any such currency control or
exchange regulation, then such Advance shall instead be repaid when due in
Dollars in a principal amount equal to the Dollar Amount (as of the date of
repayment) of such Advance.
2.13 NOTES. Each Lender is authorized to record the principal amount of
each of its Loans and each repayment with respect to its Loans on the schedule
attached to its respective Notes; PROVIDED, HOWEVER, that the failure to so
record shall not affect the Borrower's obligations under any such Note.
2.14 TELEPHONIC NOTICES. The Borrower authorizes the Lenders and the
Agent to extend Advances, effect selections of Types of Advances and to transfer
funds based on telephonic notices made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of the Borrower. The
Borrower agrees to deliver promptly to the Agent a written confirmation, signed
by an Authorized Officer, if such confirmation is requested by the Agent or any
Lender, of each telephonic notice. If the written confirmation differs in any
material respect from the action taken by the Agent and the Lenders, (i) the
telephonic notice shall govern absent manifest error and (ii) the Agent or the
Lender, as applicable, shall promptly notify the Authorized Officer who provided
such confirmation of such difference.
2.15 PROMISE TO PAY; INTEREST AND COMMITMENT FEES; INTEREST PAYMENT DATES;
INTEREST AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS.
(A) PROMISE TO PAY(A) PROMISE TO PAY. The Borrower unconditionally
promises to pay when due the principal amount of each Loan and all other
Obligations incurred by it, and to pay all unpaid interest accrued thereon, in
accordance with the terms of this Agreement, the Notes and the other Loan
Documents.
(B) INTEREST PAYMENT DATES. Interest accrued on each Floating Rate Loan
shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof, on any date on which the Floating Rate Loan is
prepaid, whether due to acceleration or otherwise, and at maturity (whether by
acceleration or otherwise). Interest accrued on each Eurocurrency Rate Loan
shall be payable on the last day of its applicable Interest Period, on any date
on which the Eurocurrency Rate Loan is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurocurrency Rate Loan
having an Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Interest Period. Interest
accrued on the principal balance of all other Obligations shall be payable in
arrears (i) on the last day of each calendar month, commencing on the first such
day following the incurrence of such Obligation, (ii) upon repayment thereof in
full or in part, and (iii) if not theretofore paid in full, at the time such
other Obligation becomes due and payable (whether by acceleration or otherwise).
(C) COMMITMENT FEES. (i) The Borrower shall pay to the Agent, for the
account of the Lenders in accordance with their Tranche A Pro Rata Shares, from
and after the Closing Date until the date on which the Aggregate Revolving Loan
Commitment shall be terminated in whole, a commitment fee accruing at the rate
of the then Applicable Commitment Fee Percentage, on the amount by which (A) the
Aggregate Revolving Loan Commitment in effect from time to time exceeds (B) the
Dollar Amount of the Revolving Credit Obligations (excluding the outstanding
principal amount of the Swing Line Loans) in effect from time to time. All such
commitment fees payable under this CLAUSE (C) shall be payable quarterly in
arrears on the last day of each fiscal
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quarter of the Borrower occurring after the Closing Date (with the first such
payment being calculated for the period from the Closing Date and ending on
March 31, 1998), and, in addition, on the date on which the Aggregate Revolving
Loan Commitment shall be terminated in whole.
(ii) The Borrower agrees to pay to the Agent for the sole account of the
Agent and the Arranger (unless otherwise agreed between the Agent and the
Arranger and any Lender) the fees set forth in the letter agreement between the
Agent, the Arranger and the Borrower dated January 27, 1998, payable at the
times and in the amounts set forth therein.
(D) INTEREST AND FEE BASIS; APPLICABLE FLOATING RATE MARGINS, APPLICABLE
EUROCURRENCY MARGINS AND APPLICABLE COMMITMENT FEE PERCENTAGE.
(i) Interest and fees shall be calculated for actual days elapsed on the
basis of a 360-day year. Interest shall be payable for the day an Obligation is
incurred but not for the day of any payment on the amount paid if payment is
received prior to 2:00 p.m. (Chicago time) at the place of payment. If any
payment of principal of or interest on a Loan or any payment of any other
Obligations shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
(ii) The Applicable Floating Rate Margins, Applicable Eurocurrency Margins
and Applicable Commitment Fee Percentage shall be determined from time to time
by reference to the table set forth below, on the basis of the then applicable
Leverage Ratio as described in this SECTION 2.15(D)(ii):
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
APPLICABLE
COMMITMENT
APPLICABLE FLOATING APPLICABLE EUROCURRENCY FEE
RATE MARGINS MARGINS PERCENTAGE
-------------------------------------- -----------------------------------
TRANCHE A TRANCHE B TRANCHE A TRANCHE B
TERM LOANS TERM LOANS TERM LOANS TERM LOANS
AND REVOLVING AND REVOLVING
LEVERAGE RATIO LOANS LOANS
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Greater than 4.0 to
1.0 1.00% 1.50% 2.00% 2.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------------------------
Greater than 3.5 to
1.0 and less than or 0.75% 1.25% 1.75% 2.25% 0.375%
equal to 4.0 to
1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Greater than 3.0 to
1.0 and less 0.50% 1.00% 1.50% 2.00% 0.30%
than or equal to
3.5 to 1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Greater than 2.5 to
1.0 and less than 0.25% 0.75% 1.25% 1.75% 0.25%
or equal to 3.0 to
1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Greater than 2.0 to
1.0 and less than 0.00% 0.50% 1.00% 1.75% 0.25%
or equal to 2.5 to
1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Less than or equal
to 2.0 to 1.0 0.00% 0.50% 0.75% 1.75% 0.20%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this SECTION 2.15(D)(ii), the Leverage Ratio shall be calculated
as provided in SECTION 7.4(B). Upon receipt of the financial statements
delivered pursuant to SECTIONS 7.1(A)(i) and (ii), as applicable, the Applicable
Floating Rate Margins, Applicable Eurocurrency Margins and Applicable Commitment
Fee Percentage shall be adjusted, such adjustment being effective five (5)
Business Days following the Agent's receipt of such financial statements and the
compliance certificate required to be delivered in connection therewith pursuant
to SECTION 7.1(A)(iii); PROVIDED, that if the Borrower shall not have timely
delivered its financial statements in accordance with SECTION 7.1(A)(i) or (ii),
as applicable, then commencing on the date upon which such financial statements
should have been delivered and continuing until such financial statements are
actually delivered, it shall be assumed for purposes of determining the
Applicable Floating Rate Margins, Applicable Eurocurrency Margins and Applicable
Commitment Fee Percentage that the Leverage Ratio was greater than 4.0 to 1.0.
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(iii) Notwithstanding anything herein to the contrary, from the Closing
Date to but not including the fifth Business Day following receipt of the
Borrower's financial statements delivered pursuant to SECTION 7.1(A)(ii) for the
fiscal year ending June 30, 1998, the Applicable Floating Rate Margins,
Applicable Eurocurrency Margins and Applicable Commitment Fee Percentage shall
be determined based upon a Leverage Ratio the Agent determines to be applicable
as of the Closing Date and in no event to be less than or equal to 3.5 to 1.0.
(E) TAXES.
(i) Any and all payments by the Borrower hereunder shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings or any liabilities
with respect thereto including those arising after the date hereof as a
result of the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a Governmental Authority or any
change in the interpretation or application thereof by a Governmental
Authority but excluding, in the case of each Lender and the Agent, such
taxes (including income taxes, franchise taxes and branch profit taxes) as
are imposed on or measured by such Lender's or Agent's, as the case may be,
income by the United States of America or any Governmental Authority of the
jurisdiction under the laws of which such Lender or Agent, as the case may
be, is organized or maintains a Lending Installation (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings, and liabilities
which the Agent or a Lender determines to be applicable to this Agreement,
the other Loan Documents, the Revolving Loan Commitments, the Loans or the
Letters of Credit being hereinafter referred to as "TAXES"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under the other Loan Documents to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable
to additional sums payable under this SECTION 2.15(E)) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall
make such deductions, and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law. If a withholding tax of the United States
of America or any other Governmental Authority shall be or become
applicable (y) after the date of this Agreement, to such payments by the
Borrower made to the Lending Installation or any other office that a Lender
may claim as its Lending Installation, or (z) after such Lender's selection
and designation of any other Lending Installation, to such payments made to
such other Lending Installation, such Lender shall use reasonable efforts
to make, fund and maintain its Loans through another Lending Installation
of such Lender in another jurisdiction so as to reduce the Borrower's
liability hereunder, if the making, funding or maintenance of such Loans
through such other Lending Installation of such Lender does not, in the
judgment of such Lender, otherwise adversely affect such Loans, or
obligations under the Revolving Loan Commitments or such Lender.
(ii) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges,
or similar levies which arise from any payment made hereunder, from the
issuance of Letters of Credit hereunder, or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the other
Loan Documents, the Revolving Loan Commitments, the Loans or the Letters of
Credit (hereinafter referred to as "OTHER TAXES").
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<PAGE>
(iii) The Borrower indemnifies each Lender and the Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed by any Governmental Authority on amounts payable
under this SECTION 2.15(E)) paid by such Lender or the Agent (as the case
may be) and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted. This indemnification shall
be made within thirty (30) days after the date such Lender or the Agent (as
the case may be) makes written demand therefor. A certificate as to any
additional amount payable to any Lender or the Agent under this
SECTION 2.15(E) submitted to the Borrower and the Agent (if a Lender is so
submitting) by such Lender or the Agent shall show in reasonable detail the
amount payable and the calculations used to determine such amount and
shall, absent manifest error, be final, conclusive and binding upon all
parties hereto. With respect to such deduction or withholding for or on
account of any Taxes and to confirm that all such Taxes have been paid to
the appropriate Governmental Authorities, the Borrower shall promptly (and
in any event not later than thirty (30) days after receipt) furnish to each
Lender and the Agent such certificates, receipts and other documents as may
be required (in the judgment of such Lender or the Agent) to establish any
tax credit to which such Lender or the Agent may be entitled.
(iv) Within thirty (30) days after the date of any payment of Taxes
or Other Taxes by the Borrower, the Borrower shall furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this SECTION 2.15(E) shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit
and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrower under this
SECTION 2.15(E), each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof
shall deliver to the Borrower and the Agent on or before the Closing Date,
or, if later, the date on which such Lender becomes a Lender pursuant to
SECTION 13.3, a true and accurate certificate executed in duplicate by a
duly authorized officer of such Lender, in a form satisfactory to the
Borrower and the Agent, to the effect that such Lender is eligible under
the provisions of an applicable tax treaty concluded by the United States
of America (in which case the certificate shall be accompanied by two
executed copies of Form 1001 of the IRS) or under Section 1442 of the Code
(in which case the certificate shall be accompanied by two copies of
Form 4224 of the IRS) to receive payments of interest hereunder without
deduction or withholding of United States federal income tax. Each such
Lender further agrees to deliver to the Borrower and the Agent from time to
time a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender substantially in a form satisfactory to
the Borrower and the Agent, before or promptly upon the occurrence of any
event requiring a change in the most recent certificate previously
delivered by it to the Borrower and the Agent pursuant to this
SECTION 2.15(E)(vi). Further, each Lender which delivers a certificate
accompanied by Form 1001 of the IRS covenants and agrees to deliver to the
Borrower and the Agent within fifteen (15) days prior to January 1, 1999,
and every third (3rd) anniversary of such date thereafter on which this
Agreement is still in effect, another such certificate and two accurate and
complete original signed copies of Form 1001 (or any successor form or
forms required under the Code or the applicable regulations promulgated
thereunder), and each Lender that delivers a certificate accompanied by
Form 4224 of the IRS covenants and agrees to deliver to the Borrower and
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<PAGE>
the Agent within fifteen (15) days prior to the beginning of each
subsequent taxable year of such Lender during which this Agreement is still
in effect, another such certificate and two accurate and complete original
signed copies of IRS Form 4224 (or any successor form or forms required
under the Code or the applicable regulations promulgated thereunder). Each
such certificate shall certify as to one of the following:
(a) that such Lender is eligible to receive payments of
interest hereunder without deduction or withholding of United
States of America federal income tax;
(b) that such Lender is not eligible to receive payments of
interest hereunder without deduction or withholding of United
States of America federal income tax as specified therein but is
capable of recovering the full amount of any such deduction or
withholding from a source other than the Borrower and will not
seek any such recovery from the Borrower; or
(c) that, as a result of the adoption of or any change in
any law, treaty, rule, regulation, guideline or determination of
a Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date
such Lender became a party hereto, such Lender is not eligible to
receive payments of interest hereunder without deduction or
withholding of United States of America federal income tax as
specified therein and that it is not capable of recovering the
full amount of the same from a source other than the Borrower.
Each Lender shall promptly furnish to the Borrower and the Agent such
additional documents as may be reasonably required by the Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained without
undue expense to such Lender.
(F) LOAN ACCOUNT. Each Lender shall maintain in accordance with its usual
practice an account or accounts (a "LOAN ACCOUNT") evidencing the Obligations of
the Borrower to such Lender owing to such Lender from time to time, including
the amount of principal and interest payable and paid to such Lender from time
to time hereunder and under the Notes.
(G) CONTROL ACCOUNT. The Register maintained by the Agent pursuant to
SECTION 13.3(C) shall include a control account, and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Advance made hereunder, the type of Loan comprising such
Advance and any Interest Period applicable thereto, (ii) the effective date and
amount of each Assignment Agreement delivered to and accepted by it and the
parties thereto pursuant to SECTION 13.3, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder or under the Notes, (iv) the amount of any sum received by the
Agent from the Borrower hereunder and each Lender's share thereof, and (v) all
other appropriate debits and credits as provided in this Agreement, including,
without limitation, all fees, charges, expenses and interest.
(H) ENTRIES BINDING. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error,
unless the Borrower objects to information contained in the Register and each
Loan Account within thirty (30) days of the Borrower's receipt of such
information.
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2.16 NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE
REVOLVING LOAN COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Revolving Loan
Commitment reduction notice, Borrowing/Conversion/Continuation Notice, and
repayment notice received by it hereunder. The Agent will notify each Lender of
the interest rate and Agreed Currency applicable to each Eurocurrency Rate Loan
promptly upon determination of such interest rate and Agreed Currency and will
give each Lender prompt notice of each change in the Alternate Base Rate.
2.17 LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or facsimile notice
to the Agent and the Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
2.18 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
2.19 TERMINATION DATE. This Agreement shall be effective until the
Termination Date. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations (other than contingent indemnity
obligations) shall have been fully and indefeasibly paid and satisfied, all
financing arrangements among the Borrower and the Lenders shall have been
terminated (other than under Interest Rate Agreements or other agreements with
respect to Hedging Obligations) and all of the Letters of Credit shall have
expired, been canceled or terminated, all of the rights and remedies under this
Agreement and the other Loan Documents shall survive.
2.20 REPLACEMENT OF CERTAIN LENDERS. In the event a Lender ("AFFECTED
LENDER") shall have: (i) failed to fund its Tranche A Pro Rata Share or Tranche
B Pro Rata Share, as applicable, of any Advance requested by the Borrower, or to
fund a Revolving Loan in order to repay Swing Line Loans pursuant to SECTION
2.3(D), which such Lender is obligated to fund under the terms of this Agreement
and which failure has not been cured, (ii) requested compensation from the
Borrower under SECTIONS 2.15(E), 4.1 or 4.2 to recover Taxes, Other Taxes or
other additional costs incurred by such Lender which are not being incurred
generally by the other Lenders, (iii) delivered a notice pursuant to SECTION 4.3
claiming that such Lender is unable to extend Eurocurrency Rate Loans to the
Borrower for reasons not generally applicable to the other Lenders or (iv) has
invoked SECTION 10.2, then, in any such case, the Borrower or the Agent may make
written demand on such Affected Lender (with a copy to the Agent in the case of
a demand by the Borrower and a copy to the Borrower in the case of a demand by
the Agent) for the Affected Lender to assign, and such Affected
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Lender shall use its best efforts to assign pursuant to one or more duly
executed Assignment Agreements five (5) Business Days after the date of such
demand, to one or more financial institutions that comply with the provisions of
SECTION 13.3(A) which the Borrower or the Agent, as the case may be, shall have
engaged for such purpose ("REPLACEMENT LENDER"), all of such Affected Lender's
rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, its Revolving Loan Commitment, all Loans owing
to it, all of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with SECTION 13.3. The Agent agrees, upon the occurrence of such
events with respect to an Affected Lender and upon the written request of the
Borrower, to use its reasonable efforts to obtain the commitments from one or
more financial institutions to act as a Replacement Lender. The Agent is
authorized to execute one or more of such assignment agreements as
attorney-in-fact for any Affected Lender failing to execute and deliver the same
within five (5) Business Days after the date of such demand. Further, with
respect to such assignment the Affected Lender shall have concurrently received,
in cash, all amounts due and owing to the Affected Lender hereunder or under any
other Loan Document, including, without limitation, the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment, amounts payable under
SECTIONS 2.15(E), 4.1, and 4.2 with respect to such Affected Lender and
compensation payable under SECTION 2.15(C) in the event of any replacement of
any Affected Lender under CLAUSE (ii) or CLAUSE (iii) of this SECTION 2.20;
PROVIDED that upon such Affected Lender's replacement, such Affected Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of SECTIONS 2.15(E), 4.1, 4.2, 4.4, and 10.7, as well as to any fees
accrued for its account hereunder and not yet paid, and shall continue to be
obligated under SECTION 11.8. Upon the replacement of any Affected Lender
pursuant to this SECTION 2.20, the provisions of SECTION 9.2 shall continue to
apply with respect to Borrowings which are then outstanding with respect to
which the Affected Lender failed to fund its Tranche A Pro Rata Share or Tranche
B Pro Rata Share, as applicable, and which failure has not been cured.
2.21 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due from the Borrower hereunder or under
any of the Notes in the currency expressed to be payable herein or under the
Notes (the "SPECIFIED CURRENCY") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase the specified currency with such other
currency at the Agent's main office in Chicago, Illinois on the Business Day
preceding that on which the final, non-appealable judgment is given. The
obligations of the Borrower in respect of any sum due to any Lender or the Agent
hereunder or under any Note shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Agent (as the case may be)
of any sum adjudged to be so due in such other currency such Lender or the Agent
(as the case may be) may in accordance with normal, reasonable banking
procedures purchase the specified currency with such other currency. If the
amount of the specified currency so purchased is less than the sum originally
due to such Lender or the Agent, as the case may be, in the specified currency,
the Borrower agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Lender or the Agent, as the case may be, against such loss, and if the amount of
the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Agent, as the case may be, in the specified currency and (b) any
amounts shared with other Lenders as a result of allocations of such excess as a
disproportionate payment to such Lender under SECTION 12.2, such Lender or the
Agent, as the case may be, agrees to remit such excess to the Borrower.
2.22 MARKET DISRUPTION. Notwithstanding the satisfaction of all
conditions referred to in
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ARTICLE II with respect to any Advance in any Agreed Currency other than
Dollars, if there shall occur on or prior to the date of such Advance any change
in national or international financial, political or economic conditions or
currency exchange rates or exchange controls which would in the reasonable
opinion of the Borrower, Agent or the Required Lenders make it impracticable for
the Eurocurrency Rate Loans comprising such Advance to be denominated in the
Agreed Currency specified by the Borrower, then the Agent shall forthwith give
notice thereof to the Borrower and the Lenders, or the Borrower shall give
notice to the Agent and the Lenders, as the case may be, and such Eurocurrency
Rate Loans shall not be denominated in such currency but shall be made on such
Borrowing Date in Dollars, in an aggregate principal amount equal to the Dollar
Amount of the aggregate principal amount specified in the related Borrowing
Notice, as Floating Rate Loans, unless the Borrower notifies the Agent at least
one Business Day before such date that (i) it elects not to borrow on such date
or (ii) it elects to borrow on such date in a different Agreed Currency, as the
case may be, in which the denomination of such Eurocurrency Loans would in the
opinion of the Agent and the Required Lenders be practicable and in an aggregate
principal amount equal to the Dollar Amount of the aggregate principal amount
specified in the related Borrowing Notice.
ARTICLE III: THE LETTER OF CREDIT FACILITY
3.1 OBLIGATION TO ISSUE. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties and covenants of
the Borrower herein set forth, each Issuing Bank hereby agrees to issue for the
account of the Borrower through such Issuing Bank's branches as it and the
Borrower may jointly agree, one or more Letters of Credit denominated in Dollars
or an Agreed Currency in accordance with this ARTICLE III, from time to time
during the period, commencing on the date hereof and ending on the Business Day
prior to the Termination Date.
3.2 RESERVED.
3.3 TYPES AND AMOUNTS. No Issuing Bank shall have any obligation to and
no Issuing Bank shall:
(i) issue any Letter of Credit if on the date of issuance,
before or after giving effect to the Letter of Credit requested
hereunder, (a) the Dollar Amount of the Revolving Credit Obligations
at such time would exceed the lesser of the Aggregate Revolving Loan
Commitment at such time, or (b) the aggregate outstanding Dollar
Amount of the L/C Obligations (other than L/C Obligations in respect
of the Indemnification Letter) would exceed $2,000,000, or (c) the
Dollar Amount of all Eurocurrency Rate Loans and Letters of Credit in
Agreed Currencies other than Dollars (other than the Indemnification
Letter) would exceed the Maximum Eurocurrency Amount; or
(ii) issue any Letter of Credit which has an expiration date
later than the date which is the earlier of one (1) year after the
date of issuance thereof or five (5) Business Days immediately
preceding the Termination Date.
3.4 CONDITIONS. In addition to being subject to the satisfaction of the
conditions contained in SECTIONS 5.1 and 5.2, the obligation of an Issuing Bank
to issue any Letter of Credit is subject to the satisfaction in full of the
following conditions:
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(i) the Borrower shall have delivered to the applicable Issuing
Bank at such times and in such manner as such Issuing Bank may
reasonably prescribe, a request for issuance of such Letter of Credit
in substantially the form of EXHIBIT D hereto, duly executed
applications for such Letter of Credit, and such other documents,
instructions and agreements as may be required pursuant to the terms
thereof (all such applications, documents, instructions, and
agreements being referred to herein as the "L/C Documents"), and the
proposed Letter of Credit shall be reasonably satisfactory to such
Issuing Bank as to form and content; and
(ii) as of the date of issuance no order, judgment or decree of
any court, arbitrator or Governmental Authority shall purport by its
terms to enjoin or restrain the applicable Issuing Bank from issuing
such Letter of Credit and no law, rule or regulation applicable to
such Issuing Bank and no request or directive (whether or not having
the force of law) from a Governmental Authority with jurisdiction over
such Issuing Bank shall prohibit or request that such Issuing Bank
refrain from the issuance of Letters of Credit generally or the
issuance of that Letter of Credit.
3.5 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. (a) Subject to the
terms and conditions of this ARTICLE III and provided that the applicable
conditions set forth in SECTIONS 5.1 and 5.2 hereof have been satisfied, the
applicable Issuing Bank shall, on the requested date, issue a Letter of Credit
on behalf of the Borrower in accordance with such Issuing Bank's usual and
customary business practices and, in this connection, such Issuing Bank may
assume that the applicable conditions set forth in SECTION 5.2 hereof have been
satisfied unless it shall have received notice to the contrary from the Agent or
a Lender or has knowledge that the applicable conditions have not been met.
(b) The applicable Issuing Bank shall give the Agent written or telex
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance of a Letter of Credit, PROVIDED, HOWEVER, that the failure to provide
such notice shall not result in any liability on the part of such Issuing Bank.
(c) No Issuing Bank shall extend or amend any Letter of Credit unless the
requirements of this SECTION 3.5 are met as though a new Letter of Credit was
being requested and issued.
3.6 LETTER OF CREDIT PARTICIPATION. Immediately upon the issuance of each
Letter of Credit hereunder, and, in the case of the Indemnification Letter, each
Lender with a Tranche A Pro Rata Share shall be deemed to have automatically,
irrevocably and unconditionally purchased and received from the applicable
Issuing Bank an undivided interest and participation in and to such Letter of
Credit, the obligations of the Borrower in respect thereof, and the liability of
such Issuing Bank thereunder (collectively, an "L/C INTEREST") in an amount
equal to the amount available for drawing under such Letter of Credit multiplied
by such Lender's Tranche A Pro Rata Share. Each Issuing Bank will notify each
Lender promptly upon presentation to it of an L/C Draft or upon any other draw
under a Letter of Credit. On or before the Business Day on which an Issuing
Bank makes payment of each such L/C Draft or, in the case of any other draw on a
Letter of Credit, on demand by the Agent or the applicable Issuing Bank, each
Lender shall make payment to the Agent, for the account of the applicable
Issuing Bank, in immediately available funds in the Agreed Currency in an amount
equal to such Lender's Tranche A Pro Rata Share of the amount of such payment or
draw. The obligation of each Lender to reimburse the Issuing Banks under this
SECTION 3.6 shall be unconditional, continuing, irrevocable and absolute. In
the event that any Lender fails to make payment to the Agent of any amount due
under this SECTION 3.6, the Agent shall be entitled to receive, retain and apply
against such obligation the principal and interest otherwise payable to such
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Lender hereunder until the Agent receives such payment from such Lender or such
obligation is otherwise fully satisfied; PROVIDED, HOWEVER, that nothing
contained in this sentence shall relieve such Lender of its obligation to
reimburse the applicable Issuing Bank for such amount in accordance with this
SECTION 3.6.
3.7 REIMBURSEMENT OBLIGATION. The Borrower agrees unconditionally,
irrevocably and absolutely to pay immediately to the Agent, for the account of
the Lenders, the amount of each advance drawn under or pursuant to a Letter of
Credit or an L/C Draft related thereto or paid pursuant to the Indemnification
Letter (such obligation of the Borrower to reimburse the Agent for an advance
made under a Letter of Credit or L/C Draft being hereinafter referred to as a
"REIMBURSEMENT OBLIGATION" with respect to such Letter of Credit or L/C Draft).
If the Borrower at any time fails to repay a Reimbursement Obligation pursuant
to this SECTION 3.7, the Borrower shall be deemed to have elected to borrow
Revolving Loans from the Lenders, as of the date of the advance giving rise to
the Reimbursement Obligation, equal in amount to the amount of the unpaid
Reimbursement Obligation. Such Revolving Loans shall be made as of the date of
the payment giving rise to such Reimbursement Obligation, automatically, without
notice and without any requirement to satisfy the conditions precedent otherwise
applicable to an Advance of Revolving Loans. Such Revolving Loans shall
constitute a Floating Rate Advance, the proceeds of which Advance shall be used
to repay such Reimbursement Obligation. If, for any reason, the Borrower fails
to repay a Reimbursement Obligation on the day such Reimbursement Obligation
arises and, for any reason, the Lenders are unable to make or have no obligation
to make Revolving Loans, then such Reimbursement Obligation shall bear interest
from and after such day, until paid in full, at the interest rate applicable to
a Floating Rate Advance.
3.8 LETTER OF CREDIT FEES. The Borrower agrees to pay (i) quarterly, in
arrears, to the Agent for the ratable benefit of the Lenders, except as set
forth in SECTION 9.2, a letter of credit fee at a rate per annum equal to the
Applicable L/C Fee Percentage on the average daily outstanding face amount
available for drawing under all Letters of Credit, (ii) quarterly, in arrears,
to the applicable Issuing Bank, a letter of credit fronting fee at such
percentage rate as may be agreed between the Borrower and each Issuing Bank on
the average daily outstanding face amount available for drawing under all
Letters of Credit issued by such Issuing Bank, and (iii) to the applicable
Issuing Bank, all customary fees and other issuance, amendment, document
examination, negotiation and presentment expenses and related charges in
connection with the issuance, amendment, presentation of L/C Drafts, and the
like customarily charged by such Issuing Banks with respect to standby and
commercial Letters of Credit, including, without limitation, standard
commissions with respect to commercial Letters of Credit, payable at the time of
invoice of such amounts.
3.9 ISSUING BANK REPORTING REQUIREMENTS. In addition to the notices
required by SECTION 3.5(C), each Issuing Bank shall, no later than the tenth
Business Day following the last day of each month, provide to the Agent, upon
the Agent's request, schedules, in form and substance reasonably satisfactory to
the Agent, showing the date of issue, account party, amount, Agreed Currency,
expiration date and the reference number of each Letter of Credit issued by it
outstanding at any time during such month and the aggregate amount payable by
the Borrower during such month. In addition, upon the request of the Agent,
each Issuing Bank shall furnish to the Agent copies of any Letter of Credit and
any application for or reimbursement agreement with respect to a Letter of
Credit to which the Issuing Bank is party and such other documentation as may
reasonably be requested by the Agent. Upon the request of any Lender, the Agent
will provide to such Lender information concerning such Letters of Credit.
3.10 INDEMNIFICATION; EXONERATION. (A) In addition to amounts payable as
elsewhere
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provided in this ARTICLE III, the Borrower hereby agrees to protect, indemnify,
pay and save harmless the Agent, each Issuing Bank and each Lender from and
against any and all liabilities and costs which the Agent, such Issuing Bank or
such Lender may incur or be subject to as a consequence, direct or indirect, of
(i) the issuance of any Letter of Credit other than, in the case of the
applicable Issuing Bank, as a result of its Gross Negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, or (ii) the failure of the applicable Issuing Bank to honor a
drawing under a Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future DE JURE or DE FACTO Governmental
Authority (all such acts or omissions herein called "GOVERNMENTAL ACTS").
(B) As among the Borrower, the Lenders, the Agent and the Issuing Banks,
the Borrower assumes all risks of the acts and omissions of, or misuse of such
Letter of Credit by, the beneficiary of any Letters of Credit. In furtherance
and not in limitation of the foregoing, subject to the provisions of the Letter
of Credit applications and Letter of Credit reimbursement agreements executed by
the Borrower at the time of request for any Letter of Credit, neither the Agent,
any Issuing Bank nor any Lender shall be responsible (in the absence of Gross
Negligence or willful misconduct in connection therewith, as determined by the
final judgment of a court of competent jurisdiction): (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
the Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex, or
other similar form of teletransmission or otherwise; (v) for errors in
interpretation of technical trade terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Letter of Credit of the proceeds of any
drawing under such Letter of Credit; and (viii) for any consequences arising
from causes beyond the control of the Agent, the Issuing Banks and the Lenders,
including, without limitation, any Governmental Acts. None of the above shall
affect, impair, or prevent the vesting of any Issuing Bank's rights or powers
under this SECTION 3.10.
(C) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any Issuing
Bank under or in connection with the Letters of Credit or any related
certificates shall not, in the absence of Gross Negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, put the applicable Issuing Bank, the Agent or any Lender under any
resulting liability to the Borrower or relieve the Borrower of any of its
obligations hereunder to any such Person.
(D) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 3.10 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
3.11 CASH COLLATERAL. Notwithstanding anything to the contrary herein or
in any application for a Letter of Credit, after the occurrence and during the
continuance of Default, the Borrower shall, upon the Agent's demand, deliver to
the Agent for the benefit of the Lenders and the Issuing Banks, cash, or other
collateral of a type satisfactory to the Required Lenders, having a value, as
determined
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by such Lenders, equal to one hundred five percent (105%) of the aggregate
Dollar Amount of the outstanding L/C Obligations (including, without limitation,
any outstanding obligations under the Indemnification Letter). In addition, if
the Revolving Credit Availability is at any time less than the Dollar Amount of
contingent L/C Obligations (including, without limitation, any outstanding
obligations under the Indemnification Letter) outstanding at any time, the
Borrower shall deposit cash collateral with the Agent in Dollars in an amount
equal to one-hundred five percent (105%) of the Dollar Amount by which such L/C
Obligations exceed such Revolving Credit Availability. Any such collateral
shall be held by the Agent in a separate account appropriately designated as a
cash collateral account in relation to this Agreement and the Letters of Credit
and retained by the Agent for the benefit of the Lenders and the Issuing Banks
as collateral security for the Borrower's obligations in respect of this
Agreement and each of the Letters of Credit and L/C Drafts. Such amounts shall
be applied to reimburse the Issuing Banks for drawings or payments under or
pursuant to Letters of Credit or L/C Drafts, or if no such reimbursement is
required, to payment of such of the other Obligations as the Agent shall
determine. If no Default shall be continuing, amounts remaining in any cash
collateral account established pursuant to this SECTION 3.11 which are not to be
applied to reimburse an Issuing Bank for amounts actually paid or to be paid by
such Issuing Bank in respect of a Letter of Credit or L/C Draft, shall be
returned to the Borrower (after deduction of the Agent's expenses incurred in
connection with such cash collateral account).
ARTICLE IV: CHANGE IN CIRCUMSTANCES
4.1 YIELD PROTECTION. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) adopted after the date of this Agreement and having
general applicability to all banks within the jurisdiction in which such Lender
operates (excluding, for the avoidance of doubt, the effect of and phasing in of
capital requirements or other regulations or guidelines passed prior to the date
of this Agreement), or any interpretation or application thereof by any
Governmental Authority charged with the interpretation or application thereof,
or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the Borrower
(excluding federal taxation of the overall net income of any Lender or
applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans, its L/C Interests, the
Letters of Credit or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurocurrency Rate Loans) with respect to its Loans, L/C
Interests or the Letters of Credit, or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining the Loans, the L/C Interests or the Letters of
Credit or reduces any amount received by any Lender or any applicable
Lending Installation in connection with Loans or Letters of Credit, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Loans or L/C Interests
held or interest received by it or by reference to the Letters of Credit,
by an amount deemed material by such Lender;
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and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or
to reduce any amount received under this Agreement, then, within 15 days after
receipt by the Borrower of written demand by such Lender pursuant to SECTION
4.5, the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received which such Lender determines is
attributable to making, funding and maintaining its Loans, L/C Interests,
Letters of Credit and its Revolving Loan Commitment.
4.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender determines (i)
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a "Change" (as defined below), and (ii) such
increase in capital will result in an increase in the cost to such Lender of
maintaining its Loans, L/C Interests, the Letters of Credit or its obligation to
make Loans hereunder, then, within 15 days after receipt by the Borrower of
written demand by such Lender pursuant to SECTION 4.5, the Borrower shall pay
such Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans, its L/C Interests, the Letters of
Credit or its obligation to make Loans hereunder (after taking into account such
Lender's policies as to capital adequacy). "CHANGE" means (i) any change after
the date of this Agreement in the "Risk-Based Capital Guidelines" (as defined
below) excluding, for the avoidance of doubt, the effect of any phasing in of
such Risk-Based Capital Guidelines or any other capital requirements passed
prior to the date hereof, or (ii) any adoption of or change in any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement and having general applicability to all banks and
financial institutions within the jurisdiction in which such Lender operates
which affects the amount of capital required or expected to be maintained by any
Lender or any Lending Installation or any corporation controlling any Lender.
"RISK-BASED CAPITAL GUIDELINES" means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
4.3 AVAILABILITY OF TYPES OF ADVANCES. If (i) any Lender determines that
maintenance of its Eurocurrency Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, or (ii) the Required Lenders determine that (x)
deposits of a type, currency or maturity appropriate to match fund Eurocurrency
Rate Advances are not available or (y) the interest rate applicable to a Type of
Advance does not accurately reflect the cost of making or maintaining such an
Advance, then the Agent shall suspend the availability of the affected Type of
Advance and, in the case of any occurrence set forth in CLAUSE (i), require any
Advances of the affected Type to be repaid.
4.4 FUNDING INDEMNIFICATION. If any payment of a Eurocurrency Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment, or otherwise, or a
Eurocurrency Rate Advance is not made on the date specified by the Borrower for
any reason other than default by the Lenders, the Borrower indemnifies each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain the Eurocurrency Rate Advance. In connection with
any assignment by any Lender of any portion of the Loans made pursuant to
SECTION
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13.3 and made during the Syndication Period, and if, notwithstanding the
provisions of SECTION 2.4, the Borrower has requested and the Agent has
consented to the use of the Eurocurrency Rate, the Borrower shall be deemed to
have repaid all outstanding Eurocurrency Rate Advances as of the effective date
of such assignment and reborrowed such amount as a Floating Rate Advance and/or
Eurocurrency Rate Advance (chosen in accordance with the provisions of SECTION
2.4) and the indemnification provisions under this SECTION 4.4 shall apply.
4.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. If reasonably possible,
each Lender shall designate an alternate Lending Installation with respect to
its Eurocurrency Rate Loans to reduce any liability of the Borrower to such
Lender under SECTIONS 4.1 and 4.2 or to avoid the unavailability of a Type of
Advance under SECTION 4.3, so long as such designation is not disadvantageous to
such Lender. Each Lender requiring compensation pursuant to SECTION 2.15(E) or
to this ARTICLE IV shall use its reasonable efforts to notify the Borrower and
the Agent in writing of any Change, law, policy, rule, guideline or directive
giving rise to such demand for compensation not later than ninety (90) days
following the date upon which the responsible account officer of such Lender
knows or should have known of such Change, law, policy, rule, guideline or
directive. Any demand for compensation pursuant to this ARTICLE IV shall be in
writing and shall state the amount due, if any, under SECTION 4.1, 4.2 or 4.4
and shall set forth in reasonable detail the calculations upon which such Lender
determined such amount. Such written demand shall be rebuttably presumed
correct for all purposes. Determination of amounts payable under such Sections
in connection with a Eurocurrency Rate Loan shall be calculated as though each
Lender funded its Eurocurrency Rate Loan through the purchase of a deposit of
the type, currency and maturity corresponding to the deposit used as a reference
in determining the Eurocurrency Rate applicable to such Loan, whether in fact
that is the case or not. The obligations of the Borrower under SECTIONS 4.1,
4.2 and 4.4 shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE V: CONDITIONS PRECEDENT
5.1 INITIAL ADVANCES AND LETTERS OF CREDIT. The Lenders shall not be
required to make the initial Loans or issue any Letters of Credit unless (i)
such initial Loans are made not later than March 31, 1998; and (ii) the Borrower
has furnished to the Agent each of the following, with sufficient copies for the
Lenders, all in form and substance satisfactory to the Agent and the Lenders:
(1) Copies of the Certificate of Incorporation of the Borrower,
together with all amendments and a certificate of good standing, both
certified by the appropriate governmental officer in its jurisdiction of
incorporation;
(2) Copies, certified by the Secretary or Assistant Secretary of the
Borrower, of its By-Laws and of its Board of Directors' resolutions (and
resolutions of other bodies, if any are deemed necessary by counsel for any
Lender) authorizing the execution of the Loan Documents;
(3) An incumbency certificate, executed by the Secretary or Assistant
Secretary of the Borrower, which shall identify by name and title and bear
the signature of the officers of the Borrower authorized to sign the Loan
Documents and to make borrowings hereunder, upon which certificate the
Lenders shall be entitled to rely until informed of any change in writing
by the Borrower;
(4) A certificate, in form and substance satisfactory to the Agent,
signed by the chief financial officer of the Borrower, stating that on the
Closing Date all the representations in
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this Agreement are true and correct and no Default or Unmatured Default has
occurred and is continuing;
(5) The written opinions of each of the Borrower's US counsel and the
Borrower's UK counsel, addressed to the Agent and the Lenders, addressing
the issues identified in EXHIBIT F hereto containing assumptions and
qualifications acceptable to the Agent and the Lenders;
(6) Notes payable to the order of each of the applicable Lenders;
(7) Evidence satisfactory to the Agent that (i) all conditions
precedent to the consummation of the Marconi Acquisition have been
satisfied or waived with the approval of the Agent (such approval not to be
unreasonably withheld), (ii) IFR Systems Limited, a corporation organized
under English law, and the Borrower have entered into the Acquisition
Agreement in form and substance satisfactory to the Agent, (iii) the
Acquisition Agreement has been approved by all necessary corporate action
of IFR Systems Limited's and the Borrower's respective Board of Directors,
and has not been amended, waived or modified in any material respect
without the approval of the Agent (such approval not to be unreasonably
withheld) and (iv) there has not occurred any material breach or default
under the Acquisition Agreement;
(8) Evidence satisfactory to the Agent that there exists no
injunction or temporary restraining order which, in the judgment of the
Agent, would prohibit the making of the Loans or the consummation of the
Marconi Acquisition and the other transactions contemplated by the
Transaction Documents or any litigation seeking such an injunction or
restraining order;
(9) Written money transfer instructions reasonably requested by the
Agent, addressed to the Agent and signed by an Authorized Officer; and
(10) Such other documents as the Agent or any Lender or its counsel
may have reasonably requested, including, without limitation, all of the
documents reflected on the List of Closing Documents attached as EXHIBIT G
to this Agreement; and
(11) Evidence satisfactory to the Agent that the Borrower has paid to
the Agent and the Arranger the fees agreed to in the fee letter dated
January 27, 1998, among the Agent, the Arranger and the Borrower.
5.2 EACH ADVANCE AND LETTER OF CREDIT. The Lenders shall not be required
to make any Advance, or issue any Letter of Credit, unless on the applicable
Borrowing Date, or in the case of a Letter of Credit, the date on which the
Letter of Credit is to be issued:
(i) There exists no Default or Unmatured Default;
(ii) The representations and warranties contained in ARTICLE VI are
true and correct as of such Borrowing Date except for changes in the
Schedules to this Agreement reflecting transactions permitted by or not in
violation of this Agreement; and
(iii) (x) The Revolving Credit Obligations do not, and after making
such proposed Advance or issuing such Letter of Credit would not, exceed
the Aggregate Revolving Loan Commitment, and (y) the aggregate outstanding
principal Dollar Amount of all Eurocurrency
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Rate Advances in currencies other than Dollars does not and would not
exceed the Maximum Eurocurrency Amount.
Each Borrowing/Conversion/Continuation Notice with respect to each such
Advance and the letter of credit application with respect to each Letter of
Credit shall constitute a representation and warranty by the Borrower that the
conditions contained in SECTIONS 5.2(i) and (ii) have been satisfied. Any
Lender may require a duly completed officer's certificate in substantially the
form of EXHIBIT H hereto and/or a duly completed compliance certificate in
substantially the form of EXHIBIT I hereto as a condition to making an Advance.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement
and to make the Loans and the other financial accommodations to the Borrower and
to issue the Letters of Credit described herein, the Borrower represents and
warrants as follows to each Lender and the Agent as of the Closing Date, giving
effect to the Marconi Acquisition and the consummation of the other transactions
contemplated by the Transaction Documents on the Closing Date, and thereafter on
each date as required by SECTION 5.2:
6.1 ORGANIZATION; CORPORATE POWERS. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which failure to be so qualified and in good
standing could not reasonably be expected to have a Material Adverse Effect, and
(iii) has all requisite corporate power and authority to own, operate and
encumber its property and to conduct its business as presently conducted and as
proposed to be conducted.
6.2 AUTHORITY.
(A) The Borrower and each of its Subsidiaries has the requisite corporate
power and authority to execute, deliver and perform each of the Transaction
Documents which are to be executed by it in connection with the Marconi
Acquisition or which have been executed by it as required by this Agreement and
the other Loan Documents on or prior to Closing Date and (ii) to file the
Transaction Documents which must be filed by it in connection with the Marconi
Acquisition or which have been filed by it as required by this Agreement, the
other Loan Documents or otherwise on or prior to the Closing Date with any
Governmental Authority.
.
(B) The execution, delivery, performance and filing, as the case may be, of
each of the Transaction Documents which must be executed or filed by the
Borrower or any of its Subsidiaries in connection with the Marconi Acquisition
or which have been executed or filed as required by this Agreement, the other
Loan Documents or otherwise on or prior to the Closing Date and to which the
Borrower or any of its Subsidiaries is party, and the consummation of the
transactions contemplated thereby, have been duly approved by the respective
boards of directors and, if necessary, the shareholders of the Borrower and its
Subsidiaries, and such approvals have not been rescinded. No other corporate
action or proceedings on the part of the Borrower or its Subsidiaries are
necessary to consummate such transactions.
(C) Each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is a party has been duly executed, delivered or filed, as the case
may be, by it and constitutes its legal,
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valid and binding obligation, enforceable against it in accordance with its
terms (except as enforceability may be limited by bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally), is in
full force and effect and no material term or condition thereof has been
amended, modified or waived from the terms and conditions contained in the
Transaction Documents delivered to the Agent pursuant to SECTION 5.1 without the
prior written consent of the Required Lenders, and the Borrower and its
Subsidiaries have, and, to the best of the Borrower's and its Subsidiaries'
knowledge, all other parties thereto have, performed and complied with all the
terms, provisions, agreements and conditions set forth therein and required to
be performed or complied with by such parties on or before the Closing Date, and
no unmatured default, default or breach of any covenant by any such party exists
thereunder.
6.3 NO CONFLICT; GOVERNMENTAL CONSENTS. The execution, delivery and
performance of each of the Loan Documents and other Transaction Documents to
which the Borrower or any of its Subsidiaries is a party do not and will not
(i) conflict with the certificate or articles of incorporation or by-laws of the
Borrower or any such Subsidiary, (ii) constitute a tortious interference with
any Contractual Obligation of any Person or conflict with, result in a breach of
or constitute (with or without notice or lapse of time or both) a default under
any Requirement of Law (including, without limitation, any Environmental
Property Transfer Act) or Contractual Obligation of the Borrower or any such
Subsidiary, or require termination of any Contractual Obligation, except such
interference, breach, default or termination which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect,
(iii) with respect to the Loan Documents, constitute a tortious interference
with any Contractual Obligation of any Person or conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under any Requirement of Law (including, without limitation, any
Environmental Property Transfer Act) or Contractual Obligation of the Borrower
or any such Subsidiary, or require termination of any Contractual Obligation,
except such interference, breach, default or termination which individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect, (iv) result in or require the creation or imposition of any Lien
whatsoever upon any of the property or assets of the Borrower or any such
Subsidiary, other than Liens permitted by the Loan Documents, or (v) require any
approval of the Borrower's or any such Subsidiary's shareholders except such as
have been obtained. Except as set forth on SCHEDULE 6.3 to this Agreement, the
execution, delivery and performance of each of the Transaction Documents to
which the Borrower or any of its Subsidiaries is a party do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by any Governmental Authority, including under any
Environmental Property Transfer Act, except filings, consents or notices which
have been made, obtained or given, or which, if not made, obtained or given,
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
6.4 FINANCIAL STATEMENTS.
(A) The combined PRO FORMA balance sheet, income statements and statements
of cash flow of the Borrower and its Subsidiaries, copies of which are attached
hereto as SCHEDULE 6.4 to this Agreement, present on a PRO FORMA basis the
financial condition of the Borrower and such Subsidiaries as of such date, and
reflect on a PRO FORMA basis those liabilities reflected in the notes thereto
and resulting from consummation of the Marconi Acquisition and the other
transactions contemplated by this Agreement, and the payment or accrual of all
transaction costs payable on the Closing Date with respect to any of the
foregoing and demonstrate that, after giving effect to the Marconi Acquisition,
the Borrower and its Subsidiaries can repay their debt and satisfy their other
obligations as and when due, and can comply with the requirements of this
Agreement. The projections and assumptions expressed in the PRO FORMA
financials referenced in this SECTION 6.4(A)
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were prepared in good faith and represent management's opinion based on the
information available to the Borrower at the time so furnished and, since the
preparation thereof and up to the Closing Date, there has occurred no material
adverse change in the business, financial condition, operations, or prospects of
the Borrower or any of its Subsidiaries, Marconi (US), Marconi (UK), or the
Borrower, its Subsidiaries, Marconi (US) and Marconi (UK) taken as a whole.
(B) Complete and accurate copies of the following financial statements and
the following related information have been delivered to the Agent: (1) the
audited financial statements and the audit report related thereto of the
Borrower and its Subsidiaries as at June 30, 1997, June 30, 1996 and June 30,
1995, and of Marconi (UK) and its Subsidiaries as at March 31, 1997 and March
31, 1996; (2) the tax returns filed with the IRS of Marconi (US) as at March 31,
1997, March 31, 1996 and March 31, 1995; and (3) the unaudited consolidating and
combined balance sheets as of December 31, 1997 and unaudited consolidating and
combined income statements for the nine-month period ending December 31, 1997 of
Marconi (UK) and its Subsidiaries and Marconi (US).
6.5 NO MATERIAL ADVERSE CHANGE. (a) Since June 30, 1997 up to the Closing
Date, there has occurred no change in the business, properties, condition
(financial or otherwise) or results of operations of the Borrower, or the
Borrower and its Subsidiaries taken as a whole or any other event which has had
or could reasonably be expected to have a Material Adverse Effect, except for a
one-time restructuring charge in connection with the Marconi Acquisition in an
amount not to exceed $7,000,000.
(b) Since the Closing Date, there has occurred no change in the business,
properties, condition (financial or otherwise) or results of operations of the
Borrower or the Borrower and its Subsidiaries taken as a whole or any other
event which has had or could reasonably be expected to have a Material Adverse
Effect.
6.6 TAXES.
(A) TAX EXAMINATIONS. All deficiencies which have been asserted against
the Borrower or any of the Borrower's Subsidiaries as a result of any federal,
state, local or foreign tax examination for each taxable year in respect of
which an examination has been conducted have been fully paid or finally settled
or are being contested in good faith, and as of the Closing Date no issue has
been raised by any taxing authority in any such examination which, by
application of similar principles, reasonably can be expected to result in
assertion by such taxing authority of a material deficiency for any other year
not so examined which has not been reserved for in the Borrower's consolidated
financial statements to the extent, if any, required by Agreement Accounting
Principles. Except as permitted pursuant to SECTION 7.2(D), neither the
Borrower nor any of the Borrower's Subsidiaries anticipates any material tax
liability with respect to the years which have not been closed pursuant to
applicable law.
(B) PAYMENT OF TAXES. All tax returns and reports of the Borrower and its
Subsidiaries required to be filed have been timely filed, and all taxes,
assessments, fees and other governmental charges thereupon and upon their
respective property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid except those items which
are being contested in good faith and have been reserved for in accordance with
Agreement Accounting Principles. The Borrower has no knowledge of any proposed
tax assessment against the Borrower or any of its Subsidiaries that will have or
could reasonably be expected to have a Material Adverse Effect.
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6.7 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. Except as set forth in
SCHEDULE 6.7 to this Agreement, there is no action, suit, proceeding,
arbitration or (to the Borrower's knowledge) investigation before or by any
Governmental Authority or private arbitrator pending or, to the Borrower's
knowledge, threatened against the Borrower or any of its Subsidiaries or any
property of any of them (i) challenging the validity or the enforceability of
any material provision of the Transaction Documents or (ii) which will have or
could reasonably be expected to have a Material Adverse Effect. There is no
material loss contingency within the meaning of Agreement Accounting Principles
which has not been reflected in the consolidated financial statements of the
Borrower prepared and delivered pursuant to SECTION 7.1(A) for the fiscal period
during which such material loss contingency was incurred. Neither the Borrower
nor any of its Subsidiaries is (A) in violation of any applicable Requirements
of Law which violation will have or could reasonably be expected to have a
Material Adverse Effect, or (B) subject to or in default with respect to any
final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or Governmental Authority which will
have or could reasonably be expected to have a Material Adverse Effect.
6.8 SUBSIDIARIES. SCHEDULE 6.8 to this Agreement (i) contains a
description of the corporate structure of the Borrower, its Subsidiaries and any
other Person in which the Borrower or any of its Subsidiaries holds an Equity
Interest (both narratively and in chart form); and (ii) accurately sets forth
(A) the correct legal name, the jurisdiction of incorporation and the
jurisdictions in which each of the Borrower and the direct and indirect
Subsidiaries of the Borrower is qualified to transact business as a foreign
corporation, (B) the authorized, issued and outstanding shares of each class of
Capital Stock of the Borrower and each of its Subsidiaries and the owners of
such shares (both as of the Closing Date and on a fully-diluted basis), and (C)
a summary of the direct and indirect partnership, joint venture, or other Equity
Interests, if any, of the Borrower and each Subsidiary of the Borrower in any
Person that is not a corporation. Except as disclosed on SCHEDULE 6.8, none of
the issued and outstanding Capital Stock of any of the Borrower's Subsidiaries
is subject to any vesting, redemption, or repurchase agreement, and there are no
warrants or options outstanding with respect to such Capital Stock. The
outstanding Capital Stock of the Borrower and each of the Borrower's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and is not Margin Stock.
6.9 ERISA. Except as disclosed on SCHEDULE 6.9, no Benefit Plan has
incurred any accumulated funding deficiency (as defined in Sections 302(a)(2) of
ERISA and 412(a) of the Code) whether or not waived. Neither the Borrower nor
any member of the Controlled Group has incurred any liability to the PBGC which
remains outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Schedule B to the most recent
annual report filed with the IRS with respect to each Benefit Plan and furnished
to the lenders is complete and accurate. Since the date of each such
Schedule B, there has been no material adverse change in the funding status or
financial condition of the Benefit Plan relating to such Schedule B. Neither
the Borrower nor any member of the Controlled Group has (i) failed to make a
required contribution or payment to a Multiemployer Plan or (ii) made a complete
or partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan. Neither the Borrower nor any member of the Controlled Group has failed to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or other payment.
Neither the Borrower nor any member of the Controlled Group is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the plan
year. Neither the Borrower nor any of its Subsidiaries maintains or contributes
to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
which provides benefits to employees after termination of employment other than
as required
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by Section 601 of ERISA. Each Plan which is intended to be qualified under
Section 401(a) of the Code as currently in effect is so qualified, and each
trust related to any such Plan is exempt from federal income tax under Section
501(a) of the Code as currently in effect. The Borrower and all Subsidiaries
are in compliance in all material respects with the responsibilities,
obligations and duties imposed on them by ERISA and the Code with respect to all
Plans. Neither the Borrower nor any of its Subsidiaries nor any fiduciary of
any Plan has engaged in a nonexempt prohibited transaction described in Sections
406 of ERISA or 4975 of the Code which could reasonably be expected to subject
the Borrower to liability in excess of $2,000,000. Neither the Borrower nor any
member of the Controlled Group has taken or failed to take any action which
would constitute or result in a Termination Event, which action or inaction
could reasonably be expected to subject the Borrower to liability in excess of
$2,000,000. Neither the Borrower nor any Subsidiary is subject to any liability
under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA and no other member of
the Controlled Group is subject to any liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA which could reasonably be expected to subject the
Borrower to liability in excess of $2,000,000. Neither the Borrower nor any of
its Subsidiaries has, by reason of the transactions contemplated hereby, any
obligation to make any payment to any employee pursuant to any Plan or existing
contract or arrangement.
6.10 ACCURACY OF INFORMATION. The information, exhibits and reports
furnished by or on behalf of the Borrower and any of its Subsidiaries to the
Agent or to any Lender in connection with the negotiation of, or compliance
with, the Loan Documents, the representations and warranties of the Borrower and
its Subsidiaries contained in the Loan Documents, and all certificates and
documents delivered to the Agent and the Lenders pursuant to the terms thereof,
taken as a whole, do not contain as of the date furnished any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
6.11 SECURITIES ACTIVITIES. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
6.12 MATERIAL AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to any Contractual Obligation or subject to any charter or other corporate
restriction which individually or in the aggregate will have or could reasonably
be expected to have a Material Adverse Effect. Neither the Borrower nor any of
its Subsidiaries has received notice or has knowledge that (i) it is in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, or (ii) any condition exists which, with the giving of notice or the lapse
of time or both, would constitute a default with respect to any such Contractual
Obligation, in each case, except where such default or defaults, if any,
individually or in the aggregate will not have or could not reasonably be
expected to have a Material Adverse Effect.
6.13 COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their respective
businesses, in each case where the failure to so comply individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
6.14 ASSETS AND PROPERTIES. The Borrower and each of its Subsidiaries has
good and marketable title to all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets (except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such assets), and all
such
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assets and property are free and clear of all Liens, except Liens permitted
under SECTION 7.3(C). Substantially all of the assets and properties owned by,
leased to or used by the Borrower and/or each such Subsidiary of the Borrower
are in adequate operating condition and repair, ordinary wear and tear excepted.
Neither this Agreement nor any other Transaction Document, nor any transaction
contemplated under any such agreement, will affect any right, title or interest
of the Borrower or such Subsidiary in and to any of such assets in a manner that
would have or could reasonably be expected to have a Material Adverse Effect.
6.15 STATUTORY INDEBTEDNESS RESTRICTIONS. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal or state statute or
regulation which limits its ability to incur indebtedness or its ability to
consummate the transactions contemplated hereby or in connection with the
Marconi Acquisition.
6.16 INSURANCE. SCHEDULE 6.16 to this Agreement accurately sets forth as
of the Closing Date all insurance policies and programs currently in effect with
respect to the respective properties and assets and business of the Borrower and
its Subsidiaries, specifying, for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the insurer
and each insured party thereunder, (iv) the policy or other identification
number thereof, (v) the expiration date thereof, (vi) the annual premium with
respect thereto, and (vii) any reserves relating to any self-insurance program
that is in effect. Such insurance policies and programs reflect coverage that
is reasonably consistent with prudent industry practice.
6.17 LABOR MATTERS.
As of the Closing Date, no attempt to organize the employees of the
Borrower, and no labor disputes, strikes or walkouts affecting the operations of
the Borrower or any of its Subsidiaries, is pending, or, to the Borrower's
knowledge, threatened, planned or contemplated.
6.18 MARCONI ACQUISITION. As of the Closing Date and immediately prior to
the making of the initial Loans:
(i) the Acquisition Agreement is in full force and effect, no
material breach, default or waiver of any term or provision thereof by the
Borrower or any of its Subsidiaries or, to the best of the Borrower's
knowledge, the other parties thereto, has occurred (except for such
breaches, defaults and waivers, if any, consented to in writing by the
Agent) and no action has been taken by any competent authority which
restrains, prevents or imposes any material adverse condition upon, or
seeks to restrain, prevent or impose any material adverse condition upon,
the Marconi Acquisition;
(ii) the representations and warranties of the Borrower contained in
the Acquisition Agreement, if any, are true and correct in all material
respects;
(iii) except as set forth in SCHEDULE 6.18 to this Agreement, all
conditions precedent to, and all consents necessary to permit, the funding
of the Marconi Acquisition have been satisfied or waived with the written
approval of the Agent (such approval not to be unreasonably withheld).
6.19 ENVIRONMENTAL MATTERS. (A) Except as disclosed on SCHEDULE 6.19 to
this Agreement
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(i) the operations of the Borrower and its Subsidiaries comply in all
material respects with Environmental, Health or Safety Requirements of Law;
(ii) the Borrower and its Subsidiaries have all permits, licenses or
other authorizations required under Environmental, Health or Safety
Requirements of Law and are in material compliance with such permits;
(iii) neither the Borrower, any of its Subsidiaries nor any of their
respective present property or operations, or, to the Borrower's or any of
its Subsidiaries' knowledge, any of their respective past property or
operations, are subject to or the subject of, any investigation known to
the Borrower or any of its Subsidiaries, any judicial or administrative
proceeding, order, judgment, decree, settlement or other agreement
respecting: (A) any material violation of Environmental, Health or Safety
Requirements of Law; (B) any remedial action; or (C) any material claims or
liabilities arising from the Release or threatened Release of a Contaminant
into the environment;
(iv) there is not now, nor to the Borrower's or any of its
Subsidiaries' knowledge has there ever been, on or in the property of the
Borrower or any of its Subsidiaries any landfill, waste pile, underground
storage tanks, aboveground storage tanks, surface impoundment or hazardous
waste storage facility of any kind, any polychlorinated biphenyls (PCBs)
used in hydraulic oils, electric transformers or other equipment, or any
asbestos containing material; and
(v) neither the Borrower nor any of its Subsidiaries has any material
Contingent Obligation in connection with any Release or threatened Release
of a Contaminant into the environment.
(B) For purposes of this SECTION 6.19 "material" means any noncompliance
or basis for liability which could reasonably be likely to subject the Borrower
to liability in excess of $2,000,000.
6.20 SOLVENCY. After giving effect to the (i) Loans to be made on the
Closing Date or such other date as Loans requested hereunder are made and (ii)
the payment and accrual of all transaction costs with respect to the foregoing,
the Borrower and its Subsidiaries taken as a whole is Solvent.
ARTICLE VII : COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders shall
otherwise give prior written consent:
7.1 REPORTING. The Borrower shall:
(A) FINANCIAL REPORTING. Furnish to the Agent (with sufficient copies for
each of the Lenders:
(i) QUARTERLY REPORTS. As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each
fiscal year, the consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income and cash flows of the
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Borrower and its Subsidiaries for such fiscal quarter and for the period
from the beginning of the then current fiscal year to the end of such
fiscal quarter, certified by the chief financial officer of the Borrower on
behalf of the Borrower as fairly presenting the consolidated and
consolidating financial position of the Borrower and its Subsidiaries as at
the dates indicated and the results of their operations and cash flows for
the periods indicated in accordance with Agreement Accounting Principles,
subject to normal year end adjustments, and a forecasted consolidated and
consolidating balance sheet and a consolidated statement of income and cash
flows of the Borrower for and as of the end of the next succeeding fiscal
quarter and a comparison of the statements of income and cash flows to the
budget.
(ii) ANNUAL REPORTS. As soon as practicable, and in any event within
ninety (90) days after the end of each fiscal year, (a) the consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related consolidated statements of income,
stockholders' equity and cash flows of the Borrower and its Subsidiaries
for such fiscal year, and in comparative form the corresponding figures for
the previous fiscal year along with consolidating schedules in form and
substance sufficient to calculate the financial covenants set forth in
SECTION 7.4, (b) a schedule from the Borrower setting forth for each item
in CLAUSE (a) hereof, the corresponding figures from the consolidated
financial budget for the current fiscal year delivered pursuant to
SECTION 7.1(A)(iv), and (c) an audit report on the items listed in CLAUSE
(a) hereof of independent certified public accountants of recognized
national standing, which audit report shall be unqualified and shall state
that such financial statements fairly present the consolidated and
consolidating financial position of the Borrower and its Subsidiaries as at
the dates indicated and the results of their operations and cash flows for
the periods indicated in conformity with Agreement Accounting Principles
and that the examination by such accountants in connection with such
consolidated and consolidating financial statements has been made in
accordance with generally accepted auditing standards. The deliveries made
pursuant to this CLAUSE (ii) shall be accompanied by (x) any management
letter prepared by the above-referenced accountants, (y) a certificate of
such accountants that, in the course of their examination necessary for
their certification of the foregoing, they have obtained no knowledge of
any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof, and (z) a letter from such accountants addressed
to the Lenders acknowledging that the Lenders are extending credit in
primary reliance on such financial statements and authorizing such
reliance.
(iii) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement (a) pursuant to CLAUSES (i), and (ii) of this SECTION
7.1(A), an Officer's Certificate of the Borrower, substantially in the form
of EXHIBIT H attached hereto and made a part hereof, stating that (x) the
representations and warranties of the Borrower contained in ARTICLE VI
hereof shall have been true and correct at all times during the period
covered by such financial statements and as of the date of such Officer's
Certificate and (y) as of the date of such Officer's Certificate no Default
or Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof and (b) pursuant to CLAUSES (i) and
(ii) of this SECTION 7.1(A), a compliance certificate, substantially in the
form of EXHIBIT I attached hereto and made a part hereof, signed by the
Borrower's Chief Financial Officer, setting forth calculations for the
period then ended for SECTION 2.5(B), if applicable, which demonstrate
compliance, when applicable, with the provisions of SECTION 7.4, and which
calculate the Leverage Ratio for purposes of determining the then
Applicable Floating Rate Margin, Applicable Eurocurrency Margin and
Applicable Commitment Fee Percentage.
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(iv) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than thirty (30) days prior to the
beginning of each fiscal year, a copy of the plan and forecast (including a
projected balance sheet, income statement and a statement of cash flow) of
the Borrower and its Subsidiaries for the upcoming five (5) fiscal years
prepared in such detail as shall be reasonably satisfactory to the Agent.
(B) NOTICE OF DEFAULT. Promptly upon any of the chief executive officer,
chief operating officer, chief financial officer, treasurer or controller of the
Borrower obtaining knowledge (i) of any condition or event which constitutes a
Default or Unmatured Default, or becoming aware that any Lender or Agent has
given any written notice with respect to a claimed Default or Unmatured Default
under this Agreement, or (ii) that any Person has given any written notice to
the Borrower or any Subsidiary of the Borrower or taken any other action with
respect to a claimed default or event or condition of the type referred to in
SECTION 8.1(E), deliver to the Agent and the Lenders an Officer's Certificate
specifying (a) the nature and period of existence of any such claimed default,
Default, Unmatured Default, condition or event, (b) the notice given or action
taken by such Person in connection therewith, and (c) what action the Borrower
has taken, is taking and proposes to take with respect thereto.
(C) LAWSUITS. (i) Promptly upon the Borrower obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower or any of its
Subsidiaries or any property of the Borrower or any of its Subsidiaries not
previously disclosed pursuant to SECTION 6.7, which action, suit, proceeding,
governmental investigation or arbitration exposes, or in the case of multiple
actions, suits, proceedings, governmental investigations or arbitrations arising
out of the same general allegations or circumstances which expose, in the
Borrower's reasonable judgment, the Borrower or any of its Subsidiaries to
liability in an amount aggregating $2,000,000 or more (exclusive of claims
covered by insurance policies of the Borrower or any of its Subsidiaries unless
the insurers of such claims have disclaimed coverage or reserved the right to
disclaim coverage on such claims and exclusive of claims covered by the
indemnity of a financially responsible indemnitor in favor of the Borrower or
any of its Subsidiaries unless the indemnitor has disclaimed or reserved the
right to disclaim coverage thereof), give written notice thereof to the Agent
and the Lenders and provide such other information as may be reasonably
available to enable each Lender and the Agent and its counsel to evaluate such
matters; and (ii) in addition to the requirements set forth in CLAUSE (i) of
this SECTION 7.1(C), upon request of the Agent or the Required Lenders, promptly
give written notice of the status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered pursuant to
CLAUSE (i) above and provide such other information as may be reasonably
available to it that would not violate any attorney-client privilege by
disclosure to the Lenders to enable each Lender and the Agent and its counsel to
evaluate such matters.
(D) ERISA NOTICE. Deliver or cause to be delivered to the Agent and the
Lenders, at the Borrower's expense, the following information and notices as
soon as reasonably possible, and in any event:
(i) (a) within ten (10) Business Days after the Borrower obtains
knowledge that a Termination Event has occurred, a written statement of the
chief financial officer of the Borrower describing such Termination Event
and the action, if any, which the Borrower has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten
(10) Business Days after any member of the Controlled Group obtains
knowledge that a Termination Event has occurred which could reasonably be
expected to subject the Borrower to liability in
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excess of $2,000,000, a written statement of the chief financial officer of
the Borrower describing such Termination Event and the action, if any,
which the member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower or any of its
Subsidiaries obtains knowledge that a prohibited transaction (defined in
Sections 406 of ERISA and Section 4975 of the Code) has occurred, a
statement of the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or such Subsidiary has taken,
is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the material increase in
the benefits of any existing Benefit Plan or the establishment of any new
Benefit Plan or the commencement of, or obligation to commence,
contributions to any Benefit Plan or Multiemployer Plan to which the
Borrower or any member of the Controlled Group was not previously
contributing, notification of such increase, establishment, commencement or
obligation to commence and the amount of such contributions;
(iv) within ten (10) Business Days after the Borrower or any of its
Subsidiaries receives notice of any unfavorable determination letter from
the IRS regarding the qualification of a Plan under Section 401(a) of the
Code, copies of each such letter;
(v) within ten (10) Business Days after the establishment of any
foreign employee benefit plan (other than the establishment of a defined
contribution plan under English law within one hundred eighty (180) days of
the Closing Date) or the commencement of, or obligation to commence,
contributions to any foreign employee benefit plan to which the Borrower or
any Subsidiary was not previously contributing, notification of such
establishment, commencement or obligation to commence and the amount of
such contributions;
(vi) within ten (10) Business Days after the filing thereof with the
DOL, IRS or PBGC, copies of each annual report (form 5500 series),
including Schedule B thereto, filed with respect to each Benefit Plan;
(vii) within ten (10) Business Days after receipt by the Borrower or
any member of the Controlled Group of each actuarial report for any Benefit
Plan or Multiemployer Plan and each annual report for any Multiemployer
Plan, copies of each such report;
(viii) within ten (10) Business Days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by the Borrower or a member of
the Controlled Group with respect to such request;
(ix) within ten (10) Business Days after receipt by the Borrower or
any member of the Controlled Group of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice;
(x) within ten (10) Business Days after receipt by the Borrower or
any member of the Controlled Group of a notice from a Multiemployer Plan
regarding the imposition of withdrawal liability, copies of each such
notice;
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(xi) within ten (10) Business Days after the Borrower or any member
of the Controlled Group fails to make a required installment or any other
required payment under Section 412 of the Code on or before the due date
for such installment or payment, a notification of such failure; and
(xii) within ten (10) Business Days after the Borrower or any member
of the Controlled Group knows or has reason to know that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan
sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan,
or (c) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multiemployer Plan.
For purposes of this SECTION 7.1(D), the Borrower, any of its Subsidiaries and
any member of the Controlled Group shall be deemed to know all facts known by
the Administrator of any Plan of which the Borrower or any member of the
Controlled Group or such Subsidiary is the plan sponsor.
(E) LABOR MATTERS. Notify the Agent and the Lenders in writing, promptly
upon the Borrower's learning thereof, of (i) any material labor dispute to which
the Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities and (ii) any Worker Adjustment and Retraining
Notification Act liability incurred with respect to the closing of any plant or
other facility of the Borrower or any of its Subsidiaries.
(F) OTHER INDEBTEDNESS. Deliver to the Agent (i) a copy of each regular
report, notice or communication regarding potential or actual defaults
(including any accompanying officer's certificate) delivered by or on behalf of
the Borrower to the holders of funded Indebtedness pursuant to the terms of the
agreements governing such Indebtedness, such delivery to be made at the same
time and by the same means as such notice or other communication is delivered to
such holders, and (ii) a copy of each notice or other communication received by
the Borrower from the from the holders of funded Indebtedness pursuant to the
terms of such Indebtedness, such delivery to be made promptly after such notice
or other communication is received by the Borrower.
(G) OTHER REPORTS. Deliver or cause to be delivered to the Agent and the
Lenders copies of all financial statements, reports and notices, if any, sent or
made available generally by the Borrower to its securities holders or filed with
the Commission by the Borrower, all press releases made available generally by
the Borrower or any of the Borrower's Subsidiaries to the public concerning
material developments in the business of the Borrower or any such Subsidiary and
all notifications received from the Commission by the Borrower or its
Subsidiaries pursuant to the Securities Exchange Act of 1934 and the rules
promulgated thereunder.
(H) ENVIRONMENTAL NOTICES. As soon as possible and in any event within
ten (10) days after receipt by the Borrower, a copy of (i) any notice or claim
to the effect that the Borrower or any of its Subsidiaries is or may be liable
to any Person as a result of the Release by the Borrower, any of its
Subsidiaries, or any other Person of any Contaminant into the environment, and
(ii) any notice alleging any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries if, in either
case, such notice or claim relates to an event which could reasonably be
expected to subject the Borrower to liability in excess of $1,000,000.
(I) OTHER INFORMATION. Promptly upon receiving a request therefor from
the Agent, prepare and deliver to the Agent and the Lenders such other
information with respect to the Borrower, any of its Subsidiaries, or the
Collateral, including, without limitation, schedules identifying and describing
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the Collateral and any dispositions thereof or any Asset Sale or Financing (and
the use of the Net Cash Proceeds thereof), as from time to time may be
reasonably requested by the Agent.
7.2 AFFIRMATIVE COVENANTS.
(A) CORPORATE EXISTENCE, ETC. The Borrower shall, and shall cause each of
its Subsidiaries to, at all times maintain its corporate existence and preserve
and keep, or cause to be preserved and kept, in full force and effect its rights
and franchises material to its businesses.
(B) CORPORATE POWERS; CONDUCT OF BUSINESS. The Borrower shall, and shall
cause each of its Subsidiaries to, qualify and remain qualified to do business
in each jurisdiction in which the nature of its business requires it to be so
qualified and where the failure to be so qualified will have or could reasonably
be expected to have a Material Adverse Effect. The Borrower will, and will
cause each Subsidiary to, carry on and conduct its business in substantially the
same manner and in substantially the same fields of enterprise as it is
presently conducted.
(C) COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, properties, assets or
operations of such Person, and (b) obtain as needed all permits necessary for
its operations and maintain such permits in good standing unless failure to
comply or obtain could not reasonably be expected to have a Material Adverse
Effect.
(D) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower shall
pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and
other governmental charges imposed upon it or on any of its properties or assets
or in respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and (ii) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Lien permitted by SECTION 7.3(C)) upon any of the Borrower's or such
Subsidiary's property or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such taxes,
assessments and governmental charges referred to in CLAUSE (i) above or claims
referred to in CLAUSE (ii) above (and interest, penalties or fines relating
thereto) need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with Agreement
Accounting Principles shall have been made therefor.
(E) INSURANCE. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect, the insurance policies and programs listed on SCHEDULE 6.16 to this
Agreement or substantially similar policies and programs or other policies and
programs as reflect coverage that is reasonably consistent with prudent industry
practice. The Borrowers shall deliver to the Agent endorsements (y) to all "All
Risk" physical damage insurance policies on all of the Borrowers' tangible real
and personal property and assets and business interruption insurance policies
naming the Agent loss payee, and (z) to all general liability and other
liability policies naming the Agent an additional insured. In the event the
Borrower or any of its Subsidiaries at any time or times hereafter shall fail to
obtain or maintain any of the policies or insurance required herein or to pay
any premium in whole or in part relating thereto, then the Agent, without
waiving or releasing any obligations or resulting Default hereunder, may at any
time or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Agent deems advisable. All sums so
disbursed by the Agent shall constitute part of the Obligations, payable as
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provided in this Agreement.
(F) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower
shall permit and cause each of the Borrower's Subsidiaries to permit, any
authorized representative(s) designated by either the Agent or any Lender to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, to examine, audit, check and make copies of their respective
financial and accounting records, books, journals, orders, receipts and any
correspondence and other data relating to their respective businesses or the
transactions contemplated hereby (including, without limitation, in connection
with environmental compliance, hazard or liability), and to discuss their
affairs, finances and accounts with their officers and independent certified
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours, as often as may be reasonably requested. The
Borrower shall keep and maintain, and cause each of the Borrower's Subsidiaries
to keep and maintain, in all material respects, proper books of record and
account in which entries in conformity with Agreement Accounting Principles
shall be made of all dealings and transactions in relation to their respective
businesses and activities. If a Default has occurred and is continuing, the
Borrower, upon the Agent's request, shall turn over any such records to the
Agent or its representatives.
(G) ERISA COMPLIANCE. The Borrower shall, and shall cause each of the
Borrower's Subsidiaries to, establish, maintain and operate all Plans to comply
in all material respects with the provisions of ERISA, the Code, all other
applicable laws, and the regulations and interpretations thereunder and the
respective requirements of the governing documents for such Plans.
(H) MAINTENANCE OF PROPERTY. The Borrower shall cause all property used
or useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that nothing in this SECTION 7.2(H) shall prevent the
Borrower from discontinuing the operation or maintenance of any of such property
if such discontinuance is, in the judgment of the Borrower, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Agent or the Lenders.
(I) ENVIRONMENTAL COMPLIANCE. The Borrower and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law, except
where noncompliance will not have or is not reasonably likely to subject the
Borrower to liability in excess of $1,000,000.
(J) USE OF PROCEEDS. The Borrower shall use the proceeds of the Term
Loans to (i) fund the Marconi Acquisition and (ii) repay existing Indebtedness.
The Borrower shall use the proceeds of the Revolving Loans to provide funds for
the additional working capital needs and other general corporate purposes of the
Borrower and its Subsidiaries. The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Loans to purchase or carry any
Margin Stock or to make any Acquisition, other than a Permitted Acquisition
pursuant to SECTION 7.3(G).
(K) INTEREST RATE AGREEMENTS. Within thirty (30) days after the Closing
Date, the Borrower shall enter into, and shall thereafter maintain, Interest
Rate Agreements on terms and with counterparties determined by the Borrower and
reasonably acceptable to the Agent by which the Borrower is protected against
increases in interest rates from and after the date of such contracts as to
notional amount not less than fifty percent (50%) of the aggregate outstanding
principal amount of
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the Term Loans for the first three (3) years during the term of this Agreement.
In the event a Lender elects to enter into any Interest Rate Agreement with the
Borrower, the obligations of the Borrower with respect to such Interest Rate
Agreement shall be Secured Obligations secured by the Collateral.
7.3 NEGATIVE COVENANTS.
(A) INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations;
(ii) Permitted Existing Indebtedness;
(iii) Indebtedness in respect of obligations secured by Customary
Permitted Liens;
(iv) Indebtedness constituting Contingent Obligations permitted by
SECTION 7.3(E);
(v) Indebtedness arising from intercompany loans from any Subsidiary
to the Borrower or any wholly-owned Subsidiary;
(vi) Indebtedness arising from intercompany loans from the Borrower to
any wholly-owned Subsidiary in an aggregate amount not to exceed
$10,000,000;
(vii) secured or unsecured purchase money Indebtedness (including
Capitalized Leases) incurred by the Borrower or any of its Subsidiaries
after the Closing Date to finance the acquisition of fixed assets, if
(1) at the time of such incurrence, no Default or Unmatured Default has
occurred and is continuing or would result from such incurrence, (2) such
Indebtedness has a scheduled maturity and is not due on demand, (3) such
Indebtedness does not exceed the lower of the fair market value or the cost
of the applicable fixed assets on the date acquired, (4) such Indebtedness
does not exceed $5,000,000 in the aggregate outstanding at any time, and
(5) any Lien securing such Indebtedness is permitted under SECTION 7.3(C)
(such Indebtedness being referred to herein as "PERMITTED PURCHASE MONEY
INDEBTEDNESS");
(viii) Indebtedness with respect to surety, appeal and performance
bonds obtained by the Borrower or any of its Subsidiaries in the ordinary
course of business;
(ix) Indebtedness incurred by the Borrower to the seller in any
Permitted Acquisition as part of the consideration therefor, PROVIDED that
such Indebtedness is unsecured and is subordinated to the Obligations on
terms reasonably acceptable to the Agent;
(x) Indebtedness in respect of Hedging Obligations permitted under
SECTION 7.3(P); and
(xi) Indebtedness arising from the loan made by IFR Finance Limited
Partnership to IFR Systems Limited in the original principal amount of
L31,055,900.
(B) SALES OF ASSETS. Neither the Borrower nor any of its Subsidiaries
shall sell, assign, transfer, lease, convey or otherwise dispose of any
property, whether now owned or hereafter
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acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
(i) sales of Inventory in the ordinary course of business;
(ii) the disposition (a) in the ordinary course of business of
Equipment that is obsolete, excess or no longer useful in the Borrower's
business and (b) of the Borrower's or any Subsidiary's fleet of vehicles
maintained in the United Kingdom; and
(iii) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets if such transaction (a) is for consideration
consisting at least eighty percent (80%) of cash, (b) is for not less than
fair market value, and (c) when combined with all such other transactions
(each such transaction being valued at book value) (i) during the
immediately preceding twelve-month period, represents the disposition of
not greater than five percent (5%) of the Borrower's Consolidated Tangible
Assets at the end of the fiscal year immediately preceding that in which
such transaction is proposed to be entered into, and (ii) during the period
from the Closing Date to the date of such proposed transaction, represents
the disposition of not greater than fifteen percent (15%) of the Borrower's
Consolidated Tangible Assets at the end of the fiscal year immediately
preceding that in which such transaction is proposed to be entered into.
(C) LIENS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of their respective property or assets except:
(i) Liens securing the Secured Obligations;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens; and
(iv) purchase money Liens (including the interest of a lessor under a
Capitalized Lease and Liens to which any property is subject at the time of
the Borrower's acquisition thereof) securing Permitted Purchase Money
Indebtedness; PROVIDED that such Liens shall not apply to any property of
the Borrower or its Subsidiaries other than that purchased or subject to
such Capitalized Lease.
In addition, neither the Borrower nor any of its Subsidiaries shall become a
party to any agreement, note, indenture or other instrument, or take any other
action, which would prohibit the creation of a Lien on any of its properties or
other assets in favor of the Agent for the benefit of itself and the Lenders, as
collateral for the Obligations; PROVIDED that any agreement, note, indenture or
other instrument in connection with Permitted Purchase Money Indebtedness
(including Capitalized Leases) may prohibit the creation of a Lien in favor of
the Agent for the benefit of itself and the Lenders on the items of property
obtained with the proceeds of such Permitted Purchase Money Indebtedness.
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(D) INVESTMENTS. Except to the extent permitted pursuant to PARAGRAPH (G)
below, neither the Borrower nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in cash and Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater than the
amount thereof on the Closing Date;
(iii) Investments in trade receivables or received in connection with
the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(iv) Investments consisting of deposit accounts maintained by the
Borrower;
(v) Investments consisting of non-cash consideration from a sale,
assignment, transfer, lease, conveyance or other disposition of property
permitted by SECTION 7.3(B);
(vi) Investments consisting of intercompany loans from any Subsidiary
to the Borrower or any other Subsidiary permitted by SECTION 7.3(A)(v);
(vii) Investments consisting of intercompany loans from the Borrower
to any wholly-owned Subsidiary permitted by SECTION 7.3(A)(vi);
(viii) Investments constituting Permitted Acquisitions;
(ix) Investments constituting Indebtedness permitted by SECTION 7.3
(A) or Contingent Obligations permitted by SECTION 7.3(E) or Restricted
Payments permitted by SECTION 7.3(F); and
(x) Investments in addition to those referred to elsewhere in this
SECTION 7.3(D) in an amount not to exceed $1,000,000 in the aggregate at
any time outstanding;
PROVIDED, HOWEVER, that the Investments described in CLAUSE (viii) above shall
not be permitted if either a Default or an Unmatured Default shall have occurred
and be continuing on the date thereof or would result therefrom.
(E) CONTINGENT OBLIGATIONS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly create or become or be liable with
respect to any Contingent Obligation, except: (i) recourse obligations resulting
from endorsement of negotiable instruments for collection in the ordinary course
of business; (ii) Permitted Existing Contingent Obligations; (iii) obligations,
warranties, and indemnities, not relating to Indebtedness of any Person, which
have been or are undertaken or made in the ordinary course of business and not
for the benefit of or in favor of an Affiliate of the Borrower or such
Subsidiary; (iv) additional Contingent Obligations which do not exceed
$1,000,000 in the aggregate at any time; (v) Contingent Obligations with respect
to surety, appeal and performance bonds obtained by the Borrower or any
Subsidiary in the ordinary course of business, (vi) Contingent Obligations
incurred pursuant to that certain Guaranty Agreement, dated as of March 15,
1997, between the Borrower and The Southwest National Bank of Wichita, as
trustee, in connection with the City of Goddard, Kansas's issuance of its
Industrial Revenue Refunding and Improvement Bonds, Series 1997 (IFR Systems,
Inc.), dated as of March 15, 1997, as in effect on
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March 15, 1997 and without giving effect to any amendments, restatements or
other modifications thereto and (vii) Contingent Obligations incurred by the
Borrower in favor of The General Electric Company, p.l.c. pursuant to the
Acquisition Agreement, as in effect on the Closing Date, and without giving
effect to any amendments, restatements or other modifications thereto.
(F) RESTRICTED PAYMENTS. The Borrower shall not declare or make any
Restricted Payment unless and until the Leverage Ratio (calculated as of the
last day of the most recent fiscal quarter ended immediately preceding the
declaration or payment of such proposed Restricted Payment) is less than or
equal to 2.00 to 1.00; PROVIDED, HOWEVER, that in no event shall any Restricted
Payments be declared or made if either a Default or an Unmatured Default shall
have occurred and be continuing at the date of declaration or payment thereof or
would result therefrom.
(G) CONDUCT OF BUSINESS; SUBSIDIARIES; ACQUISITIONS. Neither the Borrower
nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by the Borrower on the date hereof and any business or
activities which are substantially similar, related or incidental thereto. The
Borrower shall not create, acquire or any Subsidiary after the date hereof. The
Borrower shall not make any Acquisitions, other than (x) the Marconi Acquisition
and (y) Acquisitions meeting the following requirements or otherwise approved by
the Required Lenders (each such Acquisition constituting a "PERMITTED
ACQUISITION"):
(i) no Default or Unmatured Default shall have occurred and be
continuing or would result from such Acquisition or the incurrence of any
Indebtedness in connection therewith;
(ii) the Acquisition shall be consummated pursuant to acquisition
documents satisfactory to the Agent with representations, indemnities and
opinions satisfactory to the Agent and results of due diligence
satisfactory to the Agent;
(iii) the Acquisition, together with all other Permitted Acquisitions
permitted under this SECTION 7.3(G), shall not exceed an amount equal to
(x) $5,000,000 (including the incurrence of any Indebtedness in connection
therewith) in any fiscal year and (y) $20,000,000 (including the incurrence
of any Indebtedness in connection therewith) during the term of this
Agreement, and the Borrower shall have complied with all of the
requirements of the Collateral Documents in respect thereof;
(iv) the businesses being acquired shall be substantially similar to
the businesses or activities engaged in by the Borrower on the Closing
Date; and
(v) prior to each such Acquisition, the Borrower shall deliver to the
Agent and the Lenders a certificate from one of the Authorized Officers,
demonstrating to the satisfaction of the Agent that after giving effect to
such Acquisition and the incurrence of any Indebtedness permitted by
SECTION 7.3(A) in connection therewith, on a PRO FORMA basis using
historical audited and reviewed unaudited financial statements obtained
form the seller, broken down by fiscal quarter in the Borrower's reasonable
judgment, as if the Acquisition and such incurrence of Indebtedness had
occurred on the first day of the twelve-month period ending on the last day
of the Borrower's most recently completed fiscal quarter, the Borrower
would have been in compliance with the financial covenants in SECTION 7.4
and not otherwise in Default.
(H) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the Borrower
nor any of its Subsidiaries shall directly or indirectly enter into or permit to
exist any transaction (including,
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without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder or holders of any of the Equity
Interests of the Borrower, or with any Affiliate of the Borrower which is not
its Subsidiary, on terms that are less favorable to the Borrower or any of its
Subsidiaries, as applicable, than those that might be obtained in an arm's
length transaction at the time from Persons who are not such a holder or
Affiliate, except for Restricted Payments permitted by SECTION 7.3(F).
(I) RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor any of
its Subsidiaries shall enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or property, whether now or hereafter acquired, except (i)
transactions permitted under SECTIONS 7.3(B) or 7.3(G) and (ii) a Subsidiary of
the Borrower may be merged into or consolidated with the Borrower (in which case
the Borrower shall be the surviving corporation) or any wholly-owned Subsidiary
of the Borrower.
(J) SALES AND LEASEBACKS. Neither the Borrower nor any of its
Subsidiaries shall become liable, directly, by assumption or by Contingent
Obligation, with respect to any lease, whether an operating lease or a
Capitalized Lease, of any property (whether real or personal or mixed) other
than the Borrower's or any Subsidiary's fleet of vehicles maintained in the
United Kingdom, (i) which it or one of its Subsidiaries sold or transferred or
is to sell or transfer to any other Person, or (ii) which it or one of its
Subsidiaries intends to use for substantially the same purposes as any other
property which has been or is to be sold or transferred by it or one of its
Subsidiaries to any other Person in connection with such lease, unless in either
case the sale involved is not prohibited under SECTION 7.3(B) and the lease
involved is not prohibited under SECTION 7.3(A).
(K) MARGIN REGULATIONS. Neither the Borrower nor any of its Subsidiaries,
shall use all or any portion of the proceeds of any credit extended under this
Agreement to purchase or carry Margin Stock.
(L) ERISA. The Borrower shall not
(i) engage, or permit any of its Subsidiaries to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as defined
in Sections 302 of ERISA and 412 of the Code), with respect to any Benefit
Plan, whether or not waived;
(iii) fail, or permit any Controlled Group member to fail, to pay
timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
(iv) terminate, or permit any Controlled Group member to terminate,
any Benefit Plan which would result in any liability of the Borrower or any
Controlled Group member under Title IV of ERISA;
(v) fail to make any contribution or payment to any Multiemployer
Plan which the Borrower or any Controlled Group member may be required to
make under any agreement
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relating to such Multiemployer Plan, or any law pertaining thereto;
(vi) fail, or permit any Controlled Group member to fail, to pay any
required installment or any other payment required under Section 412 of the
Code on or before the due date for such installment or other payment; or
(vii) amend, or permit any Controlled Group member to amend, a Plan
resulting in an increase in current liability for the plan year such that
the Borrower or any Controlled Group member is required to provide security
to such Plan under Section 401(a)(29) of the Code.
(M) CORPORATE DOCUMENTS. Neither the Borrower nor any of its Subsidiaries
shall amend, modify or otherwise change any of the terms or provisions in any of
their respective constituent documents as in effect on the date hereof in any
manner adverse to the interests of the Lenders, without the prior written
consent of the Required Lenders.
(N) FISCAL YEAR. Neither the Borrower nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax purposes from a
period consisting of the 12-month period ending on the last day of June of each
year.
(O) SUBSIDIARY COVENANTS. The Borrower will not, and will not permit any
Subsidiary to, create or otherwise cause to become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to pay
dividends or make any other distribution on its stock, or make any other
Restricted Payment, pay any Indebtedness or other Obligation owed to the
Borrower or any other Subsidiary, make loans or advances or other Investments in
the Borrower or any other Subsidiary, or sell, transfer or otherwise convey any
of its property to the Borrower or any other Subsidiary.
(P) HEDGING OBLIGATIONS. The Borrower shall not and shall not permit any
of its Subsidiaries to enter into any interest rate, commodity or foreign
currency exchange, swap, collar, cap or similar agreements evidencing Hedging
Obligations, other than as required pursuant to SECTION 7.2(K) and other
interest rate, foreign currency or commodity exchange, swap, collar, cap or
similar agreements entered into by the Borrower pursuant to which the Borrower
has hedged its actual interest rate, foreign currency or commodity exposure.
Such permitted hedging agreements entered into by the Borrower and any Lender or
any affiliate of any Lender to hedge floating interest rate risk in an aggregate
notional amount not to exceed at any time an amount equal to the outstanding
balance of the Term Loans at such time are sometimes referred to herein as
"INTEREST RATE AGREEMENTS."
7.4 FINANCIAL COVENANTS. The Borrower shall comply with the following:
(A) MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower and its
consolidated Subsidiaries shall maintain a ratio ("FIXED CHARGE COVERAGE RATIO")
of (i) EBITDA during such period to (ii) the sum of the amounts of (a) cash
Interest Expense during such period PLUS (b) cash taxes paid by the Borrower and
its consolidated Subsidiaries during such period PLUS (c) scheduled amortization
of the principal portion of the Term Loans and scheduled amortization of the
principal portion of all other Indebtedness for borrowed money of the Borrower
PLUS (d) Restricted Payments paid during such period of at least 1.35 to 1.00
for each fiscal quarter for the period commencing with the fiscal quarter ending
on December 31, 1998 through the Termination Date.
In each case, the Fixed Charge Coverage Ratio shall be determined as of the last
day of each fiscal
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quarter for the four fiscal quarter period ending on such day, calculated, with
respect to Permitted Acquisitions, on a PRO FORMA basis using historical audited
and reviewed unaudited financial statements obtained from the seller, broken
down by fiscal quarter in the Borrower's reasonable judgment.
(B) MAXIMUM LEVERAGE RATIO. The Borrower shall not permit the ratio (the
"LEVERAGE RATIO") of (i) the sum of (a) Indebtedness for borrowed money and (b)
Capitalized Lease Obligations to (ii) EBITDA to be greater than:
(i) 4.25 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending June 30, 1998 through the fiscal
quarter ending September 30, 1998; and
(ii) 4.00 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending December 31, 1998 through the
fiscal quarter ending March 31, 1999; and
(iii) 3.75 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending June 30, 1999 through the fiscal
quarter ending September 30, 1999; and
(iv) 3.50 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending December 31, 1999 through the
fiscal quarter ending March 31, 2000; and
(v) 3.25 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending June 30, 2000 through the fiscal
quarter ending September 30, 2000; and
(vi) 3.00 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending December 31, 2000 through the
fiscal quarter ending March 31, 2001; and
(vii) 2.75 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending June 30, 2001 through the fiscal
quarter ending September 30, 2001; and
(viii) 2.50 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending December 31, 2001 through the
fiscal quarter ending March 31, 2002; and
(ix) 2.25 to 1.00 for each fiscal quarter for the period
commencing with the fiscal quarter ending June 30, 2002 through the fiscal
quarter ending March 31, 2003; and
(x) 2.00 to 1.00 for each fiscal quarter thereafter until the
Termination Date.
The Leverage Ratio shall be calculated, in each case, determined as of the last
day of each fiscal quarter based upon (a) for Indebtedness for borrowed money
and Capitalized Lease Obligations, Indebtedness for borrowed money and
Capitalized Lease Obligations as of the last day of each such fiscal quarter;
and (b) for EBITDA, the actual amount for the four-quarter period ending on such
day, calculated, with respect to Permitted Acquisitions, on a PRO FORMA basis
using historical audited and reviewed unaudited financial statements obtained
from the seller, broken down by fiscal quarter in the Borrower's reasonable
judgment.
(C) MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not permit its
Consolidated Net Worth at any time to be less than the sum of (a) $40,000,000,
PLUS (b) fifty percent (50%) of Net Income (if positive) calculated separately
for each fiscal quarter commencing with the fiscal quarter ending on June 30,
1998, PLUS (c) one hundred percent (100%) of the net cash proceeds resulting
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from the issuance by the Borrower of any Capital Stock. For purposes of
determining Consolidated Net Worth of the Borrower and its Subsidiaries as
required by this SECTION 7.4(C) only, Consolidated Net Worth of the Borrower and
its Subsidiaries shall be calculated excluding the effect of any write-off of
unamortized debt discount in connection with the purchase of publicly traded
Indebtedness of the Borrower and any prepayment premiums paid in connection with
any such purchase.
(D) CAPITAL EXPENDITURES. The Borrower will not, nor will it permit any
Subsidiary to, expend, or be committed to expend, for Capital Expenditures in
the acquisition of fixed assets in any fiscal year, on a non-cumulative basis,
in the aggregate for the Borrower and its Subsidiaries, in excess of
(i) $5,000,000 for the period from the Closing Date through June
30, 1998; and
(ii) $9,000,000 for the period from July 1, 1998 through June 30,
1999; and
(iii) $9,500,000 for the period from July 1 through June 30 for
each fiscal year thereafter.
ARTICLE VIII: DEFAULTS
8.1 DEFAULTS. Each of the following occurrences shall constitute a
Default under this Agreement:
(A) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall (i) fail to pay
when due any of the Obligations consisting of principal with respect to the
Loans or (ii) shall fail to pay within two (2) Business Days of the date when
due any of the other Obligations under this Agreement or the other Loan
Documents.
(B) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on the Borrower under:
(i) SECTION 7.1 and such failure shall continue unremedied for ten
(10) Business Days; or
(ii) SECTION 7.2 or 7.3 or 7.4.
(C) BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty
made or deemed made by the Borrower to the Agent or any Lender herein or by the
Borrower or any of its Subsidiaries in any of the other Loan Documents or in any
statement or certificate at any time given by any such Person pursuant to any of
the Loan Documents shall be false or misleading in any material respect on the
date as of which made (or deemed made).
(D) OTHER DEFAULTS. The Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered by
PARAGRAPHS (A) or (B) of this SECTION 8.1), or the Borrower or any of its
Subsidiaries shall default in the performance of or compliance with any term
contained in any of the other Loan Documents, and such default shall continue
for thirty (30) days after the occurrence thereof.
(E) DEFAULT AS TO OTHER INDEBTEDNESS. The Borrower or any of its
Subsidiaries shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration,
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demand or otherwise) with respect to any Indebtedness (other than the
Obligations) the outstanding principal amount of which Indebtedness is in excess
of $2,000,000; or any breach, default or event of default shall occur, or any
other condition shall exist under any instrument, agreement or indenture
pertaining to any such Indebtedness, if the effect thereof is to cause an
acceleration, mandatory redemption, a requirement that the Borrower offer to
purchase such Indebtedness or other required repurchase of such Indebtedness, or
permit the holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the Borrower or any of its Subsidiaries (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.
(F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Borrower or
any of the Borrower's Subsidiaries and the petition shall not be dismissed,
stayed, bonded or discharged within sixty (60) days after commencement of
the case; or a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of the
Borrower's Subsidiaries in an involuntary case, under any applicable
bankruptcy, insolvency or other similar law now or hereinafter in effect;
or any other similar relief shall be granted under any applicable federal,
state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Borrower or any
of the Borrower's Subsidiaries or over all or a substantial part of the
property of the Borrower or any of the Borrower's Subsidiaries shall be
entered; or an interim receiver, trustee or other custodian of the Borrower
or any of the Borrower's Subsidiaries or of all or a substantial part of
the property of the Borrower or any of the Borrower's Subsidiaries shall be
appointed or a warrant of attachment, execution or similar process against
any substantial part of the property of the Borrower or any of the
Borrower's Subsidiaries shall be issued and any such event shall not be
stayed, dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance.
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower or
any of the Borrower's Subsidiaries shall (i) commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) consent to the entry of an order for relief in an involuntary case,
or to the conversion of an involuntary case to a voluntary case, under any such
law, (iii) consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property, (iv)
make any assignment for the benefit of creditors or (v) take any corporate
action to authorize any of the foregoing.
(H) JUDGMENTS AND ATTACHMENTS. Any money judgment(s) (other than a money
judgment covered by insurance as to which the insurance company has not
disclaimed or reserved the right to disclaim coverage), writ or warrant of
attachment, or similar process against the Borrower or any of its Subsidiaries
or any of their respective assets involving in any single case or in the
aggregate an amount in excess of $2,000,000 is or are entered and shall remain
undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or
in any event later than fifteen (15) days prior to the date of any proposed sale
thereunder.
(I) DISSOLUTION. Any order, judgment or decree shall be entered against
the Borrower
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decreeing its involuntary dissolution or split up and such order shall remain
undischarged and unstayed for a period in excess of sixty (60) days; or the
Borrower shall otherwise dissolve or cease to exist except as specifically
permitted by this Agreement.
(J) LOAN DOCUMENTS. At any time, for any reason, any Loan Document as a
whole that materially affects the ability of the Agent, or any of the Lenders to
enforce the Obligations ceases to be in full force and effect or the Borrower or
any of the Borrower's Subsidiaries party thereto seeks to repudiate its
obligations thereunder.
(K) TERMINATION EVENT. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject the Borrower to liability in
excess of $2,000,000.
(L) WAIVER OF MINIMUM FUNDING STANDARD. If the plan administrator of any
Plan applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(a) of the Code and any Lender believes the
substantial business hardship upon which the application for the waiver is based
could reasonably be expected to subject either the Borrower or any Controlled
Group member to liability in excess of $2,000,000.
(M) CHANGE OF CONTROL. A Change of Control shall occur.
(N) INTEREST RATE AGREEMENTS. Nonpayment by the Borrower of any
obligation under any Interest Rate Agreement or the breach by the Borrower of
any term, provision or condition contained in any such Interest Rate Agreement.
(O) ENVIRONMENTAL MATTERS. The Borrower or any of its Subsidiaries shall
be the subject of any proceeding or investigation pertaining to (i) the Release
by the Borrower or any of its Subsidiaries of any Contaminant into the
environment, (ii) the liability of the Borrower or any of its Subsidiaries
arising from the Release by any other Person of any Contaminant into the
environment, or (iii) any violation of any Environmental, Health or Safety
Requirements of Law which by the Borrower or any of its Subsidiaries, which, in
any case, has or is reasonably likely to subject the Borrower to liability in
excess of $2,000,000.
(P) COLLATERAL DOCUMENTS. Any of the following shall occur: (i) any
Collateral Document shall for any reason fail to create a valid and perfected
first priority security interest in any collateral purported to be covered
thereby, except as permitted by the terms of any Collateral Document, (ii) any
Collateral Document shall fail to remain in full force or effect, (iii) any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Collateral Document, or (iv) the Borrower shall fail to
comply with any of the terms or provisions of any Collateral Document.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with SECTION 9.3.
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES
9.1 TERMINATION OF COMMITMENTS; ACCELERATION. If any Default described in
SECTION 8.1(F) or 8.1(G) occurs with respect to the Borrower, the obligations of
the Lenders to make Loans hereunder and the obligation of the Agent to issue
Letters of Credit hereunder shall automatically terminate and the Obligations
shall immediately become due and payable without any election or
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action on the part of the Agent or any Lender. If any other Default occurs, the
Required Lenders may terminate or suspend the obligations of the Lenders to make
Loans hereunder and the obligation of the Issuing Banks to issue Letters of
Credit hereunder, or declare the Obligations to be due and payable, or both,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the Borrower
expressly waives.
9.2 DEFAULTING LENDER. In the event that any Lender fails to fund its
Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any
Advance requested or deemed requested by the Borrower, which such Lender is
obligated to fund under the terms of this Agreement (the funded portion of such
Advance being hereinafter referred to as a "NON PRO RATA LOAN"), until the
earlier of such Lender's cure of such failure and the termination of the
Revolving Loan Commitments, the proceeds of all amounts thereafter repaid to the
Agent by the Borrower and otherwise required to be applied to such Lender's
share of all other Obligations pursuant to the terms of this Agreement shall be
advanced to the Borrower by the Agent on behalf of such Lender to cure, in full
or in part, such failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this SECTION 9.2 shall apply
only with respect to the proceeds of payments of Obligations and shall
not affect the conversion or continuation of Loans pursuant to SECTION
2.10;
(ii) any such Lender shall be deemed to have cured its failure
to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as
applicable, of any Advance at such time as an amount equal to such
Lender's original Tranche A Pro Rata Share or Tranche B Pro Rata
Share, as applicable, of the requested principal portion of such
Advance is fully funded to the Borrower, whether made by such Lender
itself or by operation of the terms of this SECTION 9.2, and whether
or not the Non Pro Rata Loan with respect thereto has been repaid,
converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in
part, any such Lender's failure to fund its Tranche A Pro Rata Share
or Tranche B Pro Rata Share, as applicable, of any Advance ("CURE
LOANS") shall bear interest at the rate applicable to Floating Rate
Loans in effect from time to time, and for all other purposes of this
Agreement shall be treated as if they were Floating Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to
its desired application, all repayments of principal which, in
accordance with the other terms of this Agreement, would be applied to
the outstanding Floating Rate Loans shall be applied FIRST, ratably to
all Floating Rate Loans constituting Non Pro Rata Loans, SECOND,
ratably to Floating Rate Loans other than those constituting Non Pro
Rata Loans or Cure Loans and, THIRD, ratably to Floating Rate Loans
constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's
cure of the failure to fund its Tranche A Pro Rata Share or Tranche B
Pro Rata Share, as applicable, of any Advance and the termination of
the Revolving Loan Commitments, the term "Required Lenders" for
purposes of this Agreement shall mean Lenders (excluding all Lenders
whose failure to fund their respective Tranche A Pro Rata Share or
Tranche B Pro Rata Share, as applicable, of such Advance have not been
so cured) whose Pro Rata Shares represent greater than fifty percent
(50%) of the aggregate Pro
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Rata Shares of such Lenders; and
(vi) for so long as and until any such Lender's failure to fund
its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as
applicable, of any Advance is cured in accordance with SECTION
9.2(II), (A) such Lender shall not be entitled to any commitment fees
with respect to its Revolving Loan Commitment and (B) such Lender
shall not be entitled to any letter of credit fees, which commitment
fees and letter of credit fees shall accrue in favor of the Lenders
which have funded their respective Tranche A Pro Rata Share or Tranche
B Pro Rata Share, as applicable, of such requested Advance, shall be
allocated among such performing Lenders ratably based upon their
relative Revolving Loan Commitments, and shall be calculated based
upon the average amount by which the aggregate Revolving Loan
Commitments of such performing Lenders exceeds the sum of (I) the
outstanding principal amount of the Loans owing to such performing
Lenders, PLUS (II) the outstanding Reimbursement Obligations owing to
such performing Lenders, PLUS (III) the aggregate participation
interests of such performing Lenders arising pursuant to SECTION 3.6
with respect to undrawn and outstanding Letters of Credit.
9.3 AMENDMENTS. Subject to the provisions of this ARTICLE IX, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; PROVIDED, HOWEVER, that no such supplemental agreement shall,
without the consent of each Lender (which is not a defaulting Lender under the
provisions of SECTION 9.2) affected thereby:
(i) Postpone or extend the Revolving Loan Termination Date, the
Tranche A Term Loan Termination Date or the Tranche B Term Loan Termination
Date or any other date fixed for any payment of principal of, or interest
on, the Loans, the Reimbursement Obligations or any fees or other amounts
payable to such Lender (except with respect to (a) any modifications of the
provisions relating to prepayments of Loans and other Obligations (other
than the provisions relating to the prepayments of the Tranche B Term Loans
which can be modified only with the approval of Lenders with Tranche B Pro
Rata Shares greater than fifty percent (50%)) and (b) a waiver of the
application of the default rate of interest pursuant to SECTION 2.11
hereof).
(ii) Reduce the principal amount of any Loans or L/C Obligations, or
reduce the rate or extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters or amend the
definitions of "Required Lenders", "Tranche A Pro Rata Share", "Tranche B
Pro Rata Share", or "Pro Rata Share".
(iv) Increase the amount of the Revolving Loan Commitment of any
Lender hereunder or increase any Lender's Tranche A Pro Rata Share, Tranche
B Pro Rata Share or Pro Rata Share.
(v) Permit the Borrower to assign its rights under this Agreement.
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(vi) Release all or substantially all of the Collateral.
(vii) Amend this SECTION 9.3.
No amendment of any provision of this Agreement relating to (a) the Agent shall
be effective without the written consent of the Agent, and (b) Swing Line Loans
shall be effective without the written consent of the Swing Line Bank. The
Agent may waive payment of the fee required under SECTION 13.3(B) without
obtaining the consent of any of the Lenders.
9.4 PRESERVATION OF RIGHTS. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan or the issuance of a Letter of Credit notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Loan or issuance of such Letter of Credit shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to SECTION 9.3, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE X: GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
10.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
10.3 PERFORMANCE OF OBLIGATIONS. The Borrower agrees that the Agent may,
but shall have no obligation, after the occurrence and during the continuance of
a Default, to make any other payment or perform any act required of the Borrower
under any Loan Document. The Agent shall use its reasonable efforts to give the
Borrower notice of any action taken under this SECTION 10.3 prior to the taking
of such action or promptly thereafter provided the failure to give such notice
shall not affect the Borrower's obligations in respect thereof. The Borrower
agrees to pay the Agent, upon demand, the principal amount of all funds advanced
by the Agent under this SECTION 10.3, together with interest thereon at the rate
from time to time applicable to Floating Rate Loans from the date of such
advance until the outstanding principal balance thereof is paid in full. If the
Borrower fails to make payment in respect of any such advance under this SECTION
10.3 within one (1) Business Day after the date the Borrower receives written
demand therefor from the Agent, the Agent shall promptly notify each Lender and
each Lender agrees that it shall thereupon make available to the Agent, in
Dollars in immediately available funds, the amount equal to such Lender's Pro
Rata Share of such advance. If such funds are not made available to the Agent
by such Lender within one (1) Business Day after the Agent's demand therefor,
the Agent will be entitled to recover any such amount from such Lender together
with interest thereon at the Federal Funds Effective Rate for each day during
the period commencing on the date of such demand and ending on the date such
amount
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is received. The failure of any Lender to make available to the Agent its Pro
Rata Share of any such unreimbursed advance under this SECTION 10.3 shall
neither relieve any other Lender of its obligation hereunder to make available
to the Agent such other Lender's Pro Rata Share of such advance on the date such
payment is to be made nor increase the obligation of any other Lender to make
such payment to the Agent. All outstanding principal of, and interest on,
advances made under this SECTION 10.3 shall constitute Obligations.
10.4 HEADINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
10.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
10.6 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other Lender (except to the extent to which
the Agent is authorized to act as such). The failure of any Lender to perform
any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
10.7 EXPENSES; INDEMNIFICATION.
(A) EXPENSES. The Borrower shall reimburse the Agent and the Arranger for
any reasonable costs, internal charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Agent, which attorneys and paralegals may be employees of the Agent) paid or
incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, syndication, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Agent and the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys' and paralegals' fees and time
charges of attorneys and paralegals for the Agent and the Arranger and the
Lenders, which attorneys and paralegals may be employees of the Agent or the
Arranger or the Lenders) paid or incurred by the Agent or the Arranger or any
Lender in connection with the collection of the Obligations and enforcement of
the Loan Documents. In addition to expenses set forth above, the Borrower
agrees to reimburse the Agent, promptly after the Agent's request therefor, for
each audit, or other business analysis performed by or for the benefit of the
Lenders in connection with this Agreement or the other Loan Documents in an
amount equal to the Agent's then customary charges for each person employed to
perform such audit or analysis, plus all costs and expenses (including without
limitation, travel expenses) incurred by the Agent in the performance of such
audit or analysis. Agent shall provide the Borrower with a detailed statement
of all reimbursements requested under this SECTION 10.7(A).
(B) INDEMNITY. The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Agent, the Arranger and each and all of the Lenders and
each of their respective Affiliates, and each of such Agent's, Arranger's,
Lender's, or Affiliate's respective officers, directors, employees, attorneys
and agents (including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
ARTICLE V) (collectively, the "INDEMNITEES") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses of any kind or nature whatsoever (including,
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without limitation, the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), imposed
on, incurred by, or asserted against such Indemnitees in any manner relating to
or arising out of:
(i) this Agreement, the other Loan Documents or any of the Transaction
Documents, or any act, event or transaction related or attendant thereto or
to the Marconi Acquisition, the making of the Loans, and the issuance of
and participation in Letters of Credit hereunder, the management of such
Loans or Letters of Credit, the use or intended use of the proceeds of the
Loans or Letters of Credit hereunder, or any of the other transactions
contemplated by the Transaction Documents; or
(ii) any liabilities, obligations, responsibilities, losses, damages,
personal injury, death, punitive damages, economic damages, consequential
damages, treble damages, intentional, willful or wanton injury, damage or
threat to the environment, natural resources or public health or welfare,
costs and expenses (including, without limitation, attorney, expert and
consulting fees and costs of investigation, feasibility or remedial action
studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future
relating to violation of any Environmental, Health or Safety Requirements
of Law arising from or in connection with the past, present or future
operations of the Borrower, its Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future environmental,
health or safety condition of any respective property of the Borrower or
its Subsidiaries, the presence of asbestos-containing materials at any
respective property of the Borrower or its Subsidiaries or the Release or
threatened Release of any Contaminant into the environment (collectively,
the "INDEMNIFIED MATTERS");
PROVIDED, HOWEVER, the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused by or resulting from the
willful misconduct or Gross Negligence of such Indemnitee with respect to the
Loan Documents, as determined by the final non-appealed judgment of a court of
competent jurisdiction. If the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, the Borrower shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by the Indemnitees.
(C) WAIVER OF CERTAIN CLAIMS; SETTLEMENT OF CLAIMS. The Borrower further
agrees to assert no claim against any of the Indemnitees on any theory of
liability for exemplary or punitive damages. No settlement shall be entered
into by the Borrower or any if its Subsidiaries with respect to any claim,
litigation, arbitration or other proceeding relating to or arising out of the
transactions evidenced by this Agreement, the other Loan Documents or in
connection with the Marconi Acquisition (whether or not the Agent or any Lender
or any Indemnitee is a party thereto) unless such settlement releases all
Indemnitees from any and all liability with respect thereto.
(D) SURVIVAL OF AGREEMENTS. The obligations and agreements of the
Borrower under this SECTION 10.7 shall survive the termination of this
Agreement.
10.8 NUMBERS OF DOCUMENTS. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
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10.9 ACCOUNTING. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
10.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
10.11 NONLIABILITY OF LENDERS. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower's business or operations.
10.12 GOVERNING LAW. THE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF
ITSELF AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT
THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT OR ANY LENDER ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
10.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF
THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, OR ANY
LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER THE BORROWER OR (2) REALIZE ON ANY SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON ANY SECURITY FOR THE OBLIGATIONS
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE
BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
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OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
SUBSECTION (B).
(C) VENUE. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
ARTICLE XI: THE AGENT
11.1 APPOINTMENT; NATURE OF RELATIONSHIP. The First National Bank of
Chicago is appointed by the Lenders as the Agent hereunder and under each other
Loan Document, and each of the Lenders irrevocably authorizes the Agent to act
as the contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents. The Agent agrees to
act as such contractual representative upon the express conditions contained in
this ARTICLE XI. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement and that the Agent is
merely acting as the representative of the Lenders with only those duties as are
expressly set forth in this Agreement and the other Loan Documents. In its
capacity as the Lenders' contractual representative, the Agent (i) does not
assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of
the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code
and (iii) is acting as an independent contractor, the rights and duties of which
are limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders, for itself and on behalf of its affiliates,
agrees to assert no claim against the Agent on any agency theory or any other
theory of liability for breach of fiduciary duty, all of which claims each
Lender waives.
11.2 POWERS. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties or fiduciary duties to the Lenders, or any
obligation to the Lenders to take any action hereunder or under any of the other
Loan Documents except any action specifically provided by the Loan Documents
required
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to be taken by the Agent.
11.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is found in a final judgment by a court of
competent jurisdiction to have arisen solely from the Gross Negligence or
willful misconduct of such Person.
11.4 NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, RECITALS, ETC. Neither
the Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in ARTICLE V, except receipt of items
required to be delivered solely to the Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness of
any Loan Document or any other instrument or writing furnished in connection
therewith. The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or in any of the other Loan
Documents, for the perfection or priority of the Liens on any of the Collateral,
or for the execution, effectiveness, genuineness, validity, legality,
enforceability, collectibility, or sufficiency of this Agreement or any of the
other Loan Documents or the transactions contemplated thereby, or for the
financial condition of any guarantor of any or all of the Obligations, the
Borrower or any of its Subsidiaries.
11.5 ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
11.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its
duties as the Agent hereunder and under any other Loan Document by or through
employees, agents, and attorney-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
11.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
11.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Revolving Loan Commitments (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the
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Borrower under the Loan Documents, (ii) for any other expenses incurred by the
Agent on behalf of the Lenders, in connection with the preparation, execution,
delivery, administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent any of the foregoing is found
in a final non-appealable judgment by a court of competent jurisdiction to have
arisen solely from the Gross Negligence or willful misconduct of the Agent.
11.9 RIGHTS AS A LENDER. With respect to its Revolving Loan Commitment,
its Term Loan Commitment, Loans made by it and the Notes issued to it, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as through it were not the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, and generally engage in any kind of trust, debt,
equity or other transaction, in addition to those contemplated by this Agreement
or any other Loan Document, with the Borrower or any of its Subsidiaries in
which such Person is not prohibited hereby from engaging with any other Person.
11.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
11.11 SUCCESSOR AGENT. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint, on behalf of the Borrower and
the Lenders, a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty days after the retiring Agent's giving notice of resignation, then
the retiring Agent may appoint, on behalf of the Borrower and the Lenders, a
successor Agent. Notwithstanding anything herein to the contrary, so long as no
Default has occurred and is continuing, each such successor Agent shall be
subject to approval by the Borrower, which approval shall not be unreasonably
withheld. Such successor Agent shall be a commercial bank having capital and
retained earnings of at least $500,000,000. Upon the acceptance of any
appointment as the Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this ARTICLE XI shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent hereunder and under the other Loan Documents.
11.12 COLLATERAL DOCUMENTS. (a) Each Lender authorizes the Agent to enter
into each of the Collateral Documents to which it is a party and to take all
action contemplated by such documents. Each Lender agrees that no Lender shall
have the right individually to seek to realize upon the security granted by any
Collateral Document, it being understood and agreed that such rights and
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remedies may be exercised solely by the Agent for the benefit of the Holders of
Secured Obligations upon the terms of the Collateral Documents.
(b) In the event that any Collateral is hereafter pledged by any
Person as collateral security for the Obligations, the Agent is hereby
authorized to execute and deliver on behalf of the Holders of Secured
Obligations any Loan Documents necessary or appropriate to grant and perfect a
Lien on such Collateral in favor of the Agent on behalf of the Holders of
Secured Obligations.
(c) The Lenders hereby authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment and satisfaction
of all of the Obligations at any time arising under or in respect of this
Agreement or the Loan Documents or the transactions contemplated hereby or
thereby; (ii) as permitted by, but only in accordance with, the terms of the
applicable Loan Document; or (iii) if approved, authorized or ratified in
writing by the Required Lenders, unless such release is required to be approved
by all of the Lenders hereunder. Upon request by the Agent at any time, the
Lenders will confirm in writing the Agent's authority to release particular
types or items of Collateral pursuant to this SECTION 11.12(c).
(d) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of any Loan Document, or consented to in writing
by the Requisite Lenders or all of the Lenders, as applicable, and upon at least
five (5) Business Days' prior written request by the Borrower, the Agent shall
(and is hereby irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens granted to the Agent
for the benefit of the Lenders herein or pursuant hereto upon the Collateral
that was sold or transferred; PROVIDED, HOWEVER, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of the Borrower or any Subsidiary
in respect of) all interests retained by the Borrower or any Subsidiary,
including (without limitation) the proceeds of the sale, all of which shall
continue to constitute part of the Collateral.
ARTICLE XII: SETOFF; RATABLE PAYMENTS
12.1 SETOFF. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Default occurs and is continuing, any
indebtedness from any Lender to the Borrower (including all account balances,
whether provisional or final and whether or not collected or available) may be
offset and applied toward the payment of the Obligations owing to such Lender,
whether or not the Obligations, or any part hereof, shall then be due.
12.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
SECTIONS 4.1, 4.2 or 4.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to the obligations owing to them. In case any such payment is
disturbed by
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legal process, or otherwise, appropriate further adjustments shall be made.
12.3 APPLICATION OF PAYMENTS. Subject to the provisions of SECTION 9.2,
the Agent shall, unless otherwise specified at the direction of the Required
Lenders which direction shall be consistent with the last sentence of this
SECTION 12.3, apply all payments and prepayments in respect of any Obligations
and all proceeds of the Collateral in the following order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay interest on and then principal of any advance made
under SECTION 10.3 for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders and the issuer(s) of
Letters of Credit;
(E) fifth, to pay interest due in respect of Swing Line Loans;
(F) sixth, to pay interest due in respect of Loans (other than Swing
Line Loans) and L/C Obligations;
(G) seventh, to the ratable payment or prepayment of principal
outstanding on Swing Line Loans;
(H) eighth, to the ratable payment or prepayment of principal
outstanding on Loans (other than Swing Line Loans), Reimbursement
Obligations and Hedging Obligations under Interest Rate Agreements in such
order as the Agent may determine in its sole discretion;
(I) ninth, to provide required cash collateral, if required pursuant
to SECTION 3.11 and
(J) tenth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable prior to
the occurrence of a Default) by the Borrower, all principal payments in respect
of Loans (other than Swing Line Loans) shall be applied FIRST, to the
outstanding Revolving Loans, and second, to the outstanding Term Loans, in each
case, first, to repay outstanding Floating Rate Loans, and THEN to repay
outstanding Eurocurrency Rate Loans with those Eurocurrency Rate Loans which
have earlier expiring Interest Periods being repaid prior to those which have
later expiring Interest Periods. The order of priority set forth in this
SECTION 12.3 and the related provisions of this Agreement are set forth solely
to determine the rights and priorities of the Agent, the Lenders, the Swing Line
Bank and the issuer(s) of Letters of Credit as among themselves. The order of
priority set forth in CLAUSES (D) through (J) of this SECTION 12.3 may at any
time and from time to time be changed by the Required Lenders without necessity
of notice to or consent of or approval by the Borrower, or any other Person;
PROVIDED, that the order of priority of payments in respect of Swing Line Loans
may be changed only with the prior written consent of the Swing Line Bank. The
order of priority set forth in CLAUSES (A) through (C) of
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this SECTION 12.3 may be changed only with the prior written consent of the
Agent.
12.4 RELATIONS AMONG LENDERS.
(A) Except with respect to the exercise of set-off rights of any Lender in
accordance with SECTION 12.1, the proceeds of which are applied in accordance
with this Agreement, and except as set forth in the following sentence, each
Lender agrees that it will not take any action, nor institute any actions or
proceedings, against the Borrower or any other obligor hereunder or with respect
to any Loan Document, without the prior written consent of the Required Lenders
or, as may be provided in this Agreement or the other Loan Documents, at the
direction of the Agent.
(B) The Lenders are not partners or co-venturers, and no Lender shall be
liable for the acts or omissions of, or (except as otherwise set forth herein in
case of the Agent) authorized to act for, any other Lender. The Agent shall
have the exclusive right on behalf of the Lenders to enforce on the payment of
the principal of and interest on any Loan after the date such principal or
interest has become due and payable pursuant to the terms of this Agreement.
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with SECTION 13.3 hereof. Notwithstanding clause (ii) of this SECTION 13.1, any
Lender may at any time, without the consent of the Borrower or the Agent, assign
all or any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; PROVIDED, HOWEVER, that no such assignment shall release the
transferor Lender from its obligations hereunder. The Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with SECTION 13.3 hereof in the case of an assignment thereof or,
in the case of any other transfer, a written notice of the transfer is filed
with the Agent. Any assignee or transferee of a Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
13.2 PARTICIPATIONS.
(A) PERMITTED PARTICIPANTS; EFFECT. Subject to the terms set forth in
this SECTION 13.2, any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("PARTICIPANTS") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Revolving Loan Commitment of such
Lender, any L/C Interest of such Lender or any other interest of such Lender
under the Loan Documents on a pro rata or non-pro rata basis. Notice of such
participation to the Borrower and the Agent shall be required prior to any
participation becoming effective with respect to a Participant which is not a
Lender or an Affiliate thereof. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such Note for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement shall
be determined as if such Lender had not sold such participating interests, and
the Borrower and the Agent shall continue
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to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under the Loan Documents except that, for purposes of
ARTICLE IV hereof, the Participants shall be entitled to the same rights as if
they were Lenders.
(B) VOTING RIGHTS. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Revolving Loan Commitment in which such
Participant has an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable pursuant to the terms of this
Agreement with respect to any such Loan or Revolving Loan Commitment, postpones
any date fixed for any regularly-scheduled payment of principal of, or interest
or fees on, any such Loan or Revolving Loan Commitment, or releases all or
substantially all of the Collateral, if any, securing any such Loan.
(C) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in SECTION 12.1 hereof in respect to
its participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, PROVIDED that each Lender shall retain the
right of setoff provided in SECTION 12.1 hereof with respect to the amount of
participating interests sold to each Participant except to the extent such
Participant exercises its right of setoff. The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided in
SECTION 12.1 hereof, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with SECTION 12.2 as if each Participant were a Lender.
13.3 ASSIGNMENTS.
(A) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("PURCHASERS") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its Revolving
Loan Commitment, all Loans owing to it, all of its participation interests in
existing Letters of Credit, and its obligation to participate in additional
Letters of Credit hereunder) in accordance with the provisions of this SECTION
13.3. Each assignment shall be of a constant, and not a varying, ratable
percentage of all of the assigning Lender's rights and obligations under this
Agreement. Such assignment shall be substantially in the form of EXHIBIT E
hereto and shall not be permitted hereunder unless such assignment is either for
all of such Lender's rights and obligations under the Loan Documents or, without
the prior written consent of the Agent, involves loans and commitments in an
aggregate amount of at least $5,000,000 (which minimum amount may be waived by
the Required Lenders after the occurrence of a Default or Unmatured Event of
Default). The consent of the Agent, shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. Each Lender with a Revolving Loan Commitment shall at all
times have a Tranche A Pro Rata Share of the Tranche A Term Loans equal to its
pro rata share of the aggregate Revolving Loan Commitments.
(B) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as APPENDIX I to EXHIBIT E hereto
(a "NOTICE OF ASSIGNMENT"), together with any consent required by SECTION
13.3.(A) hereof, and (ii) payment of a $3,500 fee by the assignee or the
assignor (as agreed) to the Agent for processing such assignment, such
assignment shall become effective on the effective date specified in such Notice
of Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the purchase
of the Commitment, Loans and L/C Obligations under the
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applicable assignment agreement are "plan assets" as defined under ERISA and
that the rights and interests of the Purchaser in and under the Loan Documents
will not be "plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser, if not already a Lender, shall for all purposes be a
Lender party to this Agreement and any other Loan Documents executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Revolving Loan Commitment, Loans and Letter of Credit participations
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this SECTION 13.3(B), the transferor Lender, the Agent and
the Borrower shall make appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Purchaser, in each case in principal amounts
reflecting their Revolving Loan Commitment and their Term Loans, as adjusted
pursuant to such assignment.
(C) THE REGISTER. The Agent shall maintain at its address referred to in
SECTION 14.1 a copy of each assignment delivered to and accepted by it pursuant
to this SECTION 13.3 and a register (the "REGISTER") for the recordation of the
names and addresses of the Lenders and the Revolving Loan Commitment of and
principal amount of the Loans owing to, each Lender from time to time and
whether such Lender is an original Lender or the assignee of another Lender
pursuant to an assignment under this SECTION 13.3. The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower and each of its Subsidiaries, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
13.4 CONFIDENTIALITY. Subject to SECTION 13.5, the Agent and the Lenders
and their respective representatives shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement and identified as such
by the Borrower in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably required
by a prospective Transferee in connection with the contemplated participation or
assignment or as required or requested by any Governmental Authority or
representative thereof or pursuant to legal process and shall require any such
Transferee to agree (and require any of its Transferees to agree) to comply with
this SECTION 13.4. In no event shall the Agent or any Lender be obligated or
required to return any materials furnished by the Borrower; PROVIDED, HOWEVER,
each prospective Transferee shall be required to agree that if it does not
become a participant or assignee it shall return all materials furnished to it
by or on behalf of the Borrower in connection with this Agreement.
13.5 DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in such Lender's possession
concerning the Borrower and its Subsidiaries; PROVIDED that prior to any such
disclosure, such prospective Transferee shall agree to preserve in accordance
with SECTION 13.4 the confidentiality of any confidential information described
therein.
ARTICLE XIV: NOTICES
14.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.14 with
respect to
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Borrowing/Conversion/Continuation Notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Documents
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes).
14.2 CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has notified the Agent by telex or telephone, that it has taken
such action.
[Remainder of This Page Intentionally Blank]
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
IFR SYSTEMS, INC., as the Borrower
By: /s/ Jeffrey A. Bloomer
----------------------------
Name: Jeffrey A. Bloomer
Title: Chief Financial Officer
Address:
10200 West York Street
Wichita, Kansas 67215
Attention: Chief Financial Officer
Telephone No.: (316) 522-8999
Facsimile No.: (316) 522-3022
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent and as a Lender
By: /s/ Donna Rae Green
----------------------------
Name: Donna Rae Green
Title: Managing Director
Address:
One First National Plaza
Suite 0088
Chicago, Illinois 60670
Attention: Donna Rae Green
Telephone No.: (312) 732-6378
Facsimile No.: (312) 732-7655
Signature Page to Credit Agreement
dated as of February 5, 1998
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EXECUTION COPY EXHIBIT 10.02
SECURITY AGREEMENT
DATED AS OF FEBRUARY 5, 1998
between
IFR SYSTEMS, INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
<PAGE>
TABLE OF CONTENTS
-------------------
SECTION 1. DEFINED TERMS 1
SECTION 2. GRANT OF SECURITY 2
SECTION 3. AUTHORIZATION 4
SECTION 4. GRANTOR REMAINS LIABLE 4
SECTION 5. REPRESENTATIONS AND WARRANTIES 5
SECTION 6. PERFECTION AND MAINTENANCE OF SECURITY INTERESTS AND LIENS 6
SECTION 7. FINANCING STATEMENTS 6
SECTION 8. FILING COSTS 7
SECTION 9. SCHEDULE OF COLLATERAL 7
SECTION 10. EQUIPMENT AND INVENTORY 7
SECTION 11. ACCOUNTS 7
SECTION 12. LEASED REAL PROPERTY 8
SECTION 13. GENERAL COVENANTS 9
SECTION 14. AGENT APPOINTED ATTORNEY-IN-FACT 9
SECTION 15. AGENT MAY PERFORM 10
SECTION 16. AGENT'S DUTIES 10
SECTION 17. REMEDIES 10
SECTION 18. EXERCISE OF REMEDIES 11
SECTION 19. LICENSE 11
SECTION 20. INJUNCTIVE RELIEF 11
SECTION 21. INTERPRETATION AND INCONSISTENCIES; MERGER 11
SECTION 22. EXPENSES 12
SECTION 23. AMENDMENTS, ETC. 12
<PAGE>
SECTION 24. NOTICES 12
SECTION 25. CONTINUING SECURITY INTEREST; TERMINATION 12
SECTION 26. SEVERABILITY; NO STRICT CONSTRUCTION 12
SECTION 27. GOVERNING LAW 13
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL 13
(A) EXCLUSIVE JURISDICTION 13
(B) OTHER JURISDICTIONS 13
(C) SERVICE OF PROCESS 14
(D) WAIVER OF JURY TRIAL 14
(E) WAIVER OF BOND 14
(F) ADVICE OF COUNSEL 14
<PAGE>
EXHIBITS AND SCHEDULES
----------------------
EXHIBITS
--------
EXHIBIT A -- Form of Landlord Agreement (with Mortgagee Provisions)
EXHIBIT B -- Form of Bailee Letter
EXHIBIT C -- Form of Restricted Account Agreement
SCHEDULES
---------
Schedule 1 -- Pledged Debt
Schedule 2 -- Locations of Collateral
Schedule 2-A -- Third Party Locations
Schedule 2-B -- Financing Statement Filing Locations
Schedule 3 -- Trade Names
Schedule 4 -- Deposit Accounts
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT ("AGREEMENT"), dated as of February 5, 1998 is
made by IFR SYSTEMS, INC., a Delaware corporation (together with its successors
and assigns, including a debtor-in-possession on behalf of IFR SYSTEMS, INC.,
"GRANTOR"), in favor of THE FIRST NATIONAL BANK OF CHICAGO (the "AGENT"), for
its benefit and for the benefit of the "Holders of Secured Obligations" (as
defined in the Credit Agreement referred to below) who are, or may hereafter
become, parties to the Credit Agreement referred to below.
PRELIMINARY STATEMENT
Grantor has entered into a certain Credit Agreement of even date
herewith among Grantor, the institutions from time to time parties thereto as
lenders (the "LENDERS") and the Agent as the contractual representative for the
Lenders (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), providing for the making of
loans, advances and other financial accommodations (including, without
limitation issuing letters of credit) (all such loans, advances and other
financial accommodations being hereinafter referred to collectively as the
"LOANS") to or for the benefit of Grantor. It is a condition precedent to the
making of the Loans under the Credit Agreement that Grantor shall have granted
the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined, and the
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and the plural forms of the terms defined):
"AGREEMENT" shall mean this Security Agreement, as the same may from
time to time be amended, restated, modified or supplemented, and shall refer to
this Agreement as the same may be in effect at the time such reference becomes
operative.
"COLLATERAL" shall mean all property and rights in property now owned
or hereafter at any time acquired by Grantor in or upon which a Lien is granted
in favor of the Agent by Grantor or a Subsidiary of Grantor under this
Agreement, including, without limitation, the property described in SECTION 2.
"RESTRICTED ACCOUNT" shall mean any deposit account listed on SCHEDULE
4 hereof (i) that is maintained with The First National Bank of Chicago, in its
capacity as Agent or otherwise, or (ii) with respect to which the Grantor has
entered into a Restricted Account Agreement substantially in the form of EXHIBIT
C hereto with the financial institution at which such deposit account is
maintained.
<PAGE>
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois; PROVIDED, HOWEVER, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the Agent's and the Holders of Secured
Obligations' security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of Illinois,
the term "UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
SECTION 2. GRANT OF SECURITY. To secure the prompt and complete
payment, observance and performance of the Secured Obligations, Grantor hereby
assigns and pledges to Agent, for the benefit of itself and the Holders of
Secured Obligations, and hereby grants to Agent, for the benefit of itself and
the Holders of Secured Obligations, a security interest in all of Grantor's
right, title and interest in and to the following, whether now owned or existing
or hereafter arising or acquired and wheresoever located:
ACCOUNTS: All "accounts" as such term is defined in Section 9-106 of
the UCC, whether now owned or hereafter acquired or arising; Grantor intends
that the term "accounts", as used herein, be construed in its broadest sense,
and such term shall include, without limitation, all present and future
accounts, accounts receivable and other rights of Grantor to payment for goods
sold or leased or for services rendered (except those evidenced by instruments
or chattel paper), whether now existing or hereafter arising and wherever
arising, and whether or not they have been earned by performance (collectively,
"ACCOUNTS");
INVENTORY: All "inventory" as defined in Section 9-109(4) of the UCC,
whether now owned or hereafter acquired or arising; Grantor intends that the
term "inventory", as used herein, be construed in its broadest sense, and such
term shall include, without limitation, all goods now owned or hereafter
acquired by Grantor (wherever located, whether in the possession of Grantor or
of a bailee or other person for sale, storage, transit, processing, use or
otherwise and whether consisting of whole goods, spare parts, components,
supplies, materials, or consigned, returned or repossessed goods) which are held
for sale or lease, which are to be furnished (or have been furnished) under any
contract of service or which are raw materials, work in process or materials
used or consumed in Grantor's business (collectively, "INVENTORY");
EQUIPMENT: All "equipment" as such term is defined in Section
9-109(2) of the UCC, whether now owned or hereafter acquired or arising; Grantor
intends that the term "equipment", as used herein, be construed in its broadest
sense, and such term shall include, without limitation, all machinery, all
manufacturing, distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling,
molds, dies, vehicles, vessels, trucks, buses, motor vehicles and all other
goods of every type and description (other than Inventory), in each instance
whether now owned or hereafter acquired by Grantor and wherever located
(collectively, "EQUIPMENT");
<PAGE>
GENERAL INTANGIBLES: All "general intangibles" as defined in Section
9-106 of the UCC, whether now owned or hereafter acquired or arising; Grantor
intends that the term "general intangibles", as used herein, be construed in its
broadest sense, and such term shall include, without limitation, all rights,
interests, choses in action, causes of actions, claims and all other intangible
property of Grantor of every kind and nature (other than Accounts), in each
instance whether now owned or hereafter acquired by Grantor and however and
whenever arising, including, without limitation, all corporate and other
business records; all loans, royalties, and other obligations receivable;
customer lists, credit files, correspondence, and advertising materials; firm
sale orders, other contracts and contract rights; all interests in partnerships
and joint ventures; all tax refunds and tax refund claims; all right, title and
interest under leases, subleases, licenses and concessions and other agreements
relating to real or personal property; all payments due or made to Grantor in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any property by any person or governmental authority; all deposit
accounts (general or special) with any bank or other financial institution,
including, without limitation, any deposits or other sums at any time credited
by or due to Grantor from any of the Holders of Secured Obligations or any of
their respective Affiliates with the same rights therein as if the deposits or
other sums were credited by or due from such Holder of Secured Obligations; all
credits with and other claims against carriers and shippers; all rights to
indemnification; all patents, and patent applications (including all reissues,
divisions, continuations and extensions); all service marks and service mark
applications; all trade secrets and inventions; all copyrights and copyright
applications (including all computer software and related documentation); all
rights and interests in and to trademarks, trademark registrations and
applications therefor, trade names, corporate names, brand names, slogans, all
goodwill associated with the foregoing; all license agreements and franchise
agreements, all reversionary interests in pension and profit sharing plans and
reversionary, beneficial and residual interest in trusts; all proceeds of
insurance of which Grantor is beneficiary; and all letters of credit,
guaranties, liens, security interests and other security held by or granted to
Grantor; and all other intangible property, whether or not similar to the
foregoing; PROVIDED, that in no event shall the Grantor be deemed to have
granted a security interest hereunder in excess of 65% of the Capital Stock of
any Foreign Incorporated Subsidiary of the Grantor;
LAB PROCESSING AND ENGINEERING INFORMATION: All rights and interests
in and to processes, lab journals, and notebooks, data, trade secrets, know-how,
product formulae and information, manufacturing, engineering and other drawings
and manuals, technology, blueprints, research and development reports, agency
agreements, technical information, technical assistance, engineering data,
design and engineering specifications, and similar materials recording or
evidencing expertise used in or employed by Grantor (including any license for
the foregoing);
CONTRACT RIGHTS: All rights and interests in and to any pending or
executory contracts, requests for quotations, invitations for bid, agreements,
leases and arrangements of which Grantor is a party to or in which Grantor has
an interest; including, without limitation, all right and interest to receive
monies due, or to become due, under that certain Stock Sale and Purchase
Agreement dated as of February 5, 1998 made by and among the Grantor, IFR
Systems Limited, and The General Electric Corporation p.l.c., as "Seller";
<PAGE>
CHATTEL PAPER, INSTRUMENTS AND DOCUMENTS: All chattel paper, leases,
all instruments, including, without limitation, the notes and debt instruments
described in SCHEDULE 1 (the "PLEDGED DEBT") and all payments thereunder and
instruments and other property from time to time delivered in respect thereof or
in exchange therefor, and all bills of sale, bills of lading, warehouse receipts
and other documents of title, in each instance whether now owned or hereafter
acquired by Grantor;
INTEREST AND CURRENCY CONTRACTS: Any and all interest rate, commodity
or currency exchange agreements or derivative agreements, including without
limitation, cap, collar, floor, forward or similar agreements or other rate,
currency or price protection arrangements; and
OTHER PROPERTY: All property or interests in property now owned or
hereafter acquired by Grantor which now may be owned or hereafter may come into
the possession, custody or control of Agent or any of the Holders of Secured
Obligations or any agent or Affiliate of any of them in any way and for any
purpose (whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise); and all rights and interests of Grantor, now existing
or hereafter arising and however and wherever arising, in respect of any and all
(i) notes, drafts, letters of credit, stocks, bonds, and debt and equity
securities, whether or not certificated, investment property (as defined in
Section 9-115(1)(f) of the UCC) and warrants, options, puts and calls and other
rights to acquire or otherwise relating to the same; PROVIDED, that in no event
shall the Grantor be deemed to have granted a security interest hereunder in
excess of 65% of the Capital Stock of any Foreign Incorporated Subsidiary of the
Grantor; (ii) money; (iii) proceeds of loans, including, without limitation,
loans made under the Credit Agreement; and (iv) insurance proceeds and books and
records relating to any of the property covered by this Agreement; together, in
each instance, with all accessions and additions thereto, substitutions
therefor, and replacements, proceeds and products thereof.
SECTION 3. AUTHORIZATION. Grantor hereby authorizes Agent to retain
and each Holder of Secured Obligations, and each Affiliate of Agent and of each
Holder of Secured Obligations, to pay or deliver to Agent, for the benefit of
the Holders of Secured Obligations, without any necessity on any Holder of
Secured Obligation's part to resort to other security or sources of
reimbursement for the Secured Obligations, at any time following the occurrence
and during the continuance of any Default, and without further notice to Grantor
(such notice being expressly waived), any of the deposits referred to in SECTION
2 (whether general or special, time or demand, provisional or final) or other
sums or property held by such Person, for application against any portion of the
Secured Obligations, irrespective of whether any demand has been made or whether
such portion of the Secured Obligations is mature. Agent will promptly notify
Grantor of Agent's receipt of such funds or other property for application
against the Secured Obligations, but failure to do so will not affect the
validity or enforceability thereof. Agent may give notice of the above grant of
security interest and assignment of the aforesaid deposits and other sums, and
authorization, to, and make any suitable arrangements with, any such Holder of
Secured Obligations for effectuation thereof, and Grantor hereby irrevocably
appoints Agent as its attorney to collect any and all such deposits or other
sums to the extent any such payment is not made to Agent by such Holder of
Secured Obligations or Affiliate thereof; PROVIDED, that the Agent agrees
<PAGE>
not to exercise such powers as attorney-in-fact unless a Default has occurred
and is continuing.
SECTION 4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) Grantor shall remain solely liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Agent of any of its rights
hereunder shall not release Grantor from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) neither Agent
nor the Holders of Secured Obligations shall have any responsibility, obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Agent or the Holders of Secured Obligations
be required or obligated, in any manner, to (i) perform or fulfill any of the
obligations or duties of Grantor thereunder, (ii) make any payment, or make any
inquiry as to the nature or sufficiency of any payment received by Grantor or
the sufficiency of any performance by any party under any such contract or
agreement or (iii) present or file any claim, or take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants, as of the date of this Agreement and as of each date hereafter (except
for changes permitted or contemplated by this Agreement) until termination of
this Agreement pursuant to SECTION 25:
(a) The correct corporate name of Grantor is set forth in the
first paragraph of this Agreement. The locations listed on SCHEDULE 2
constitute all locations at which Inventory and/or Equipment is located and
Grantor has exclusive possession and control of such Equipment and Inventory,
except for such Inventory and Equipment which is (i) temporarily in transit
between such locations, or (ii) temporarily stored with third parties or held
by third parties for processing, storage, engineering, evaluation, repairs or
sale, the proper corporate names of which third parties, the location of such
Inventory and/or Equipment, and the nature of the relationship between
Grantor and such third parties is set forth in SCHEDULE 2-A. SCHEDULE 2 may
be amended to reflect additional locations acquired in connection with
Permitted Acquisitions. The chief place of business and chief executive
office of Grantor are located at the address of Grantor set forth below the
Grantor's signature on the Credit Agreement. All records concerning any
Accounts and all originals of all chattel paper which evidence any Account
are located at the addresses listed on SCHEDULE 2 and none of the Accounts is
evidenced by a promissory note or other instrument except for such notes and
other instruments delivered to Agent as Pledged Debt listed on SCHEDULE 1.
(b) Grantor is the legal and beneficial owner of the Collateral free
and clear of all Liens except for Liens permitted by SECTION 7.3(C) of the
Credit Agreement. Grantor currently conducts business under the name IFR
SYSTEMS, INC. and, in certain areas and for certain operations, the trade names
listed on SCHEDULE 3. The Grantor uses no trade names or fictitious names,
except as set forth on SCHEDULE 3.
(c) This Agreement creates in favor of Agent a legal, valid and
enforceable security interest in the Collateral. When financing statements have
been filed in the appropriate offices against Grantor in the locations listed on
SCHEDULE 2-B, Agent will have a
<PAGE>
fully perfected first priority lien on, and security interest in, the Collateral
in which a security interest may be perfected by such filing, subject only to
Liens permitted by SECTION 7.3(C) of the Credit Agreement.
(d) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority that has not already been taken or
made and which is in full force and effect is required (i) for the grant by
Grantor of the security interest in the Collateral granted hereby; (ii) for the
execution, delivery or performance of this Agreement by Grantor; or (iii) for
the exercise by Agent of any of its rights or remedies hereunder.
(e) The Pledged Debt issued by any Affiliate of Grantor, and to the
best of Grantor's knowledge, all other Pledged Debt, has been duly authorized,
issued and delivered, and is the legal, valid, binding and enforceable
obligation of the respective issuer thereof.
(f) SCHEDULE 4 contains a complete list of all of the deposit
accounts of Grantor, and Grantor will amend and update SCHEDULE 4 by delivering
supplemental reports to Agent promptly following the establishment of any
additional deposit accounts, but in any event not less frequently than on a
calendar quarterly basis, and at any time requested by the Agent. Each deposit
account so scheduled is a Restricted Account.
SECTION 6. PERFECTION AND MAINTENANCE OF SECURITY INTERESTS AND
LIENS. Grantor agrees that until all of the Obligations (other than contingent
indemnity Obligations) have been fully satisfied and the Credit Agreement has
been terminated, Agent's security interests in and Liens on and against the
Collateral and all proceeds and products thereof shall continue in full force
and effect. Grantor shall perform any and all steps reasonably requested by
Agent to perfect, maintain and protect Agent's security interests in and Liens
on and against the Collateral granted or purported to be granted hereby or to
enable Agent to exercise its rights and remedies hereunder with respect to any
Collateral, including, without limitation, (i) executing and filing financing or
continuation statements, or amendments thereof, in form and substance reasonably
satisfactory to Agent, (ii) delivering to Agent all certificates, notes and
other instruments (including, without limitation, all letters of credit on which
Grantor is named as a beneficiary) representing or evidencing Collateral, which
certificates, notes and other instruments have been duly endorsed or are
accompanied by duly executed instruments of transfer or assignment, including,
but not limited to, note powers, all in form and substance satisfactory to
Agent, (iii) at the reasonable direction of Required Lenders, delivering to
Agent warehouse receipts covering that portion of the Collateral, if any,
located in warehouses and for which warehouse receipts are issued, (iv) after
the occurrence and during the continuance of a Default, transferring Inventory
and Equipment to warehouses designated by Agent or taking such other steps as
are deemed necessary by Agent to maintain Agent's control of the Inventory and
Equipment, (v) marking conspicuously each document, contract, chattel paper and
all records pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent, indicating that such document, contract, chattel paper,
or Collateral is subject to the security interest granted hereby, (vi) using its
best efforts to obtain waivers of Liens and access agreements in substantially
the form of EXHIBIT A hereto (or such other form as may be agreed to by the
Agent) from landlords and mortgagees with respect to Grantor's leased premises
as of the Closing Date and to obtain waivers of Liens and access agreements in
substantially the form of EXHIBIT B (or such other form as may be agreed to by
Agent) from the appropriate Person
<PAGE>
with respect to any of the Inventory temporarily stored with third parties or
held by third parties for storage, processing, engineering, repair or sale as of
the Closing Date, (vii) obtaining waivers of Liens and access agreements in
substantially the form of EXHIBIT A hereto (or such other form as may be agreed
to by Agent) from landlords and mortgagees with respect to all leases executed
by the Grantor after the Closing Date and obtaining waivers of Liens and access
agreements in substantially the form of EXHIBIT B hereto (or such other form as
may be agreed to by Agent) from the appropriate Person with respect to all
arrangements pursuant to which Inventory will be temporarily stored with third
parties or held by third parties for storage, processing, engineering, repair or
sale after the Closing Date (in connection with which the Grantor shall be
permitted to and hereby required to update SCHEDULE 2-A), and (vii) executing
and delivering all further instruments and documents, and taking all further
action, as Agent may reasonably request. Notwithstanding the foregoing, (a)
Grantor shall not permit Equipment or any other Collateral to be located in
Maryland unless such Collateral is exempt from recordation tax pursuant to
Section 12-108(k) of the Maryland Uniform Commercial Code, unless Grantor
provides the Agent with satisfactory written evidence that all such applicable
recordation taxes have been paid, and (b) within ninety (90) days after the
Closing Date, Grantor will remove all Inventory from any public warehouse
facilities with respect to which Grantor shall not have obtained from the
applicable bailee, either before or after the Closing Date, a waiver of Liens
and access agreement in substantially the form of EXHIBIT B hereto.
SECTION 7. FINANCING STATEMENTS. To the extent permitted by
applicable law, Grantor hereby authorizes Agent to file one or more financing or
continuation statements and amendments thereto, disclosing the security interest
granted to Agent under this Agreement without Grantor's signature appearing
thereon, and Agent agrees to notify Grantor when such a filing has been made.
Grantor agrees that a carbon, photographic, photostatic, or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement. If any Inventory or Equipment is in the possession or control of any
warehouseman or Grantor's agents or processors, Grantor shall, upon Agent's
request, notify such warehouseman, agent or processor of Agent's security
interest in such Inventory and Equipment and, upon Agent's request, instruct
them to hold all such Inventory or Equipment for Agent's account and subject to
Agent's instructions.
SECTION 8. FILING COSTS. Grantor shall pay the costs of, or
incidental to, all recordings or filings of all financing statements, including,
without limitation, any filing expenses incurred by Agent pursuant to SECTION 7.
SECTION 9. SCHEDULE OF COLLATERAL. Grantor shall furnish to Agent
from time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as Agent
may reasonably request, all in reasonable detail.
SECTION 10. EQUIPMENT AND INVENTORY. Grantor covenants and agrees
with Agent that from the date of this Agreement and until termination of this
Agreement pursuant to SECTION 25, Grantor shall:
(a) Keep the Equipment and Inventory (other than Equipment or
Inventory sold or disposed of as permitted by the Credit Agreement) at the
places specified in SECTION
<PAGE>
5(a), except for Equipment and Inventory (i) temporarily in transit between such
locations or (ii) temporarily stored with the third parties or held by third
parties for storage, processing, engineering, evaluation, repair or sale and set
forth on SCHEDULE 2-A, and deliver written notice to Agent at least thirty (30)
days prior to establishing any other location at which or third party with which
it reasonably expects to maintain Inventory and/or Equipment in which location
or with which third party all action required by this Agreement shall have been
taken with respect to all such Equipment and Inventory;
(b) Maintain or cause to be maintained in good repair, working order
and condition, excepting ordinary wear and tear and damage due to casualty, all
of the Equipment, and make or cause to be made all appropriate repairs, renewals
and replacements thereof, as quickly as practicable after the occurrence of any
loss or damage thereto which are necessary or desirable to such end; and
(c) Comply with the terms of the Credit Agreement with respect to
such Equipment and Inventory, including, without limitation, the maintenance and
insurance provisions set forth in SECTION 7.2 (E), (G) AND (I) of the Credit
Agreement.
SECTION 11. ACCOUNTS. Grantor covenants and agrees with Agent that
from and after the date of this Agreement and until termination of this
Agreement pursuant to SECTION 25, Grantor shall:
(a) Keep its chief place of business and chief executive office and
the office where it keeps its records concerning the Accounts at its address set
forth below the Grantor's signature on the Credit Agreement, and keep the
offices where it keeps all originals of all chattel paper which evidence
Accounts at the locations therefor specified in SECTION 5(a) or, upon thirty
(30) days' prior written notice to Agent, at such other locations within the
United States in a jurisdiction where all actions required by SECTION 6 shall
have been taken with respect to the Accounts. Grantor will hold and preserve
such records (in accordance with Grantor's usual document retention practices)
and chattel paper and will permit representatives of Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper; and
(b) In any suit, proceeding or action brought by Agent under any
Account comprising part of the Collateral, Grantor will save, indemnify and keep
each of the Holders of Secured Obligations harmless from and against all
expenses, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation or arising out
of any other agreement, indebtedness or liability at any time owing to or in
favor of such Holder of Secured Obligations from Grantor, and all such
obligations of Grantor shall be and shall remain enforceable against and only
against Grantor and shall not be enforceable against any of the Holders of
Secured Obligations.
(c) When Grantor or any of its Subsidiaries (or any Affiliates,
shareholders, directors, officers, employees, agents or those Persons acting
for or in concert with Grantor or a Subsidiary of Grantor) shall receive or
come into the possession or control of any monies, checks, notes, drafts or
any other payment relating to, or proceeds of, Grantor's Accounts or other
property constituting Collateral hereunder (individually, a "PAYMENT ITEM",
and, collectively, "PAYMENT ITEMS"), then, except as otherwise permitted in a
writing
<PAGE>
signed by the Agent, Grantor shall, or shall cause such Subsidiary or such other
Person to, deposit the same in kind in precisely the form in which such Payment
Item was received (with all Payment Items endorsed if necessary for collection)
into a Restricted Account. The Grantor further agrees that it will not, during
the term of this Agreement, without the written consent of the Agent, transfer
any funds from a Restricted Account to any deposit account that is not a
Restricted Account described on SCHEDULE 4. Prior to the Closing Date the
Grantor has entered into Restricted Account Agreements in the form of Exhibit C
with all banks at which Grantor maintains accounts.
SECTION 12. LEASED REAL PROPERTY. Grantor covenants and agrees with
Agent that from and after the date of this Agreement and until termination of
this Agreement pursuant to SECTION 25, that:
(a) Promptly following, but not later than ninety (90) days after,
the close of each fiscal year Grantor will furnish to Agent a report certified
to be true and correct by Grantor containing a list of each of the Grantor's
leased premises; the name or names of all owners; rentals being paid; and
whether Grantor has obtained waivers of Liens and access agreements from
landlords and mortgagees with respect to such premises in accordance with
SECTION 6; and
(b) Grantor agrees that, from and after the occurrence of a Default,
Agent may, but need not, make any payment or perform any act hereinbefore
required of Grantor with respect to the Grantor's leased premises in any form
and manner deemed expedient. All money paid for any of the purposes herein
authorized and all other moneys advanced by Agent to protect the lien hereof
shall be additional Secured Obligations secured hereby and shall become
immediately due and payable without notice and shall bear interest thereon at
the default interest rate as provided in SECTION 2.11 of the Credit Agreement
until paid to Agent in full.
(c) Grantor agrees that it will not amend any lease in a manner that
adversely affects the interests of the Holders of Secured Obligations without
Agent's prior written consent.
SECTION 13. GENERAL COVENANTS. Grantor covenants and agrees with
Agent that from and after the date of this Agreement and until termination of
this Agreement pursuant to SECTION 25, Grantor shall:
(a) Keep and maintain at Grantor's own cost and expense satisfactory
and complete records of Grantor's Collateral in a manner consistent with
Grantor's current business practice, including, without limitation, a record of
all payments received and all credits granted with respect to such Collateral.
Grantor shall, for Agent's further security, deliver and turn over to Agent or
Agent's designated representatives at any time following the occurrence and
during the continuation of a Default, any such books and records (including,
without limitation, any and all computer tapes, programs and source and object
codes relating to such Collateral in which Grantor has an interest or any part
or parts thereof); and
<PAGE>
(b) Grantor will not create, permit or suffer to exist, and will
defend the Collateral against, and take such other action as is necessary to
remove, any Lien on such Collateral other than Liens permitted under SECTION
7.3(C) of the Credit Agreement, and will defend the right, title and interest of
Agent in and to Grantor's rights to such Collateral, including, without
limitation, the proceeds and products thereof, against the claims and demands of
all Persons whatsoever.
SECTION 14. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints and constitutes Agent as Grantor's attorney-in-fact, with
full authority in the place and stead of Grantor and in the name of Grantor or
otherwise, from time to time in Agent's discretion, to take any action and to
execute any instrument which Agent may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, (a) following the
occurrence and during the continuance of a Default, to:
(i) obtain and adjust insurance required to be paid to the Agent
or any Holders of Secured Obligations pursuant to the Credit
Agreement;
(ii) ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(iii) receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with CLAUSE
(i) or (ii) above; and
(iv) file any claims or take any action or institute any
proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral, or otherwise to enforce the
rights of Agent with respect to any of the Collateral;
and (b) at any time, to:
(i) obtain access to records maintained for Grantor by computer
services companies and other service companies or bureaus;
(ii) send requests under Grantor's, the Agent's or a fictitious
name to Grantor's customers or account debtors for verification of
Accounts provided that the Agent gives the Grantor notice prior to
initiating any such verifications; and
(iii) do all other things reasonably necessary to carry out this
Agreement.
SECTION 15. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein or in the Credit Agreement, Agent may, upon three
days' prior notice to the Grantor, perform, or cause performance of, such
agreement, and the expenses of Agent incurred in connection therewith shall be
payable by Grantor under SECTION 22.
SECTION 16. AGENT'S DUTIES. The powers conferred on Agent hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to
<PAGE>
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Agent shall not have any duty as to any Collateral. Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which Agent accords its own property, it being understood that Agent shall
be under no obligation to take any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral, but may do so at
its option, and all reasonable expenses incurred in connection therewith shall
be for the sole account of Grantor and shall be added to the Secured
Obligations.
SECTION 17. REMEDIES. (a) If any Default shall have occurred and be
continuing:
(i) Agent shall have, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party upon default under the UCC (whether or not the UCC applies to the
affected Collateral) and further, Agent may, without notice, demand or legal
process of any kind (except as may be required by law), all of which Grantor
waives, at any time or times, (x) enter Grantor's owned or leased premises and
take physical possession of the Collateral and maintain such possession on
Grantor's owned or leased premises, at no cost to Agent or any of the Holders of
Secured Obligations, or remove the Collateral, or any part thereof, to such
other place(s) as Agent may desire, (y) require Grantor to, and Grantor hereby
agrees that it will at its expense and upon request of Agent forthwith, assemble
all or any part of the Collateral as directed by Agent and make it available to
Agent at a place to be designated by Agent which is reasonably convenient to
Agent and (z) without notice except as specified below, sell, lease, assign,
grant an option or options to purchase or otherwise dispose of the Collateral or
any part thereof at public or private sale, at any exchange, broker's board or
at any of the offices of Agent or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as Agent may deem commercially reasonable.
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned;
(ii) Agent shall apply all cash proceeds received by Agent in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral (after payment of any amounts payable to Agent pursuant to
SECTION 22), for the benefit of the Holders of Secured Obligations, against all
or any part of the Secured Obligations in such order as may be required by the
Credit Agreement or, to the extent not specified therein, as is determined by
the Required Lenders. Any surplus of such cash or cash proceeds held by Agent
and remaining after payment in full of all the Secured Obligations shall be paid
over to Grantor or to whomsoever may be lawfully entitled to receive such
surplus;
(b) Grantor waives all claims, damages and demands against Agent
arising out of the repossession, retention or sale of any of the Collateral or
any part or parts thereof, except any such claims, damages and awards arising
out of the Gross Negligence or willful
<PAGE>
misconduct of Agent or any of the Holders of Secured Obligations, as the case
may be, as determined in a final non-appealed judgment of a court of competent
jurisdiction; and
(c) The rights and remedies provided under this Agreement are
cumulative and may be exercised singly or concurrently and are not exclusive of
any rights and remedies provided by law or equity.
SECTION 18. EXERCISE OF REMEDIES. In connection with the exercise
of its remedies pursuant to SECTION 17, Agent may, (i) exchange, enforce, waive
or release any portion of the Collateral and any other security for the Secured
Obligations; (ii) apply such Collateral or security and direct the order or
manner of sale thereof as Agent may, from time to time, determine; and
(iii) settle, compromise, collect or otherwise liquidate any such Collateral or
security in any manner following the occurrence of a Default, without affecting
or impairing Agent's right to take any other further action with respect to any
Collateral or security or any part thereof.
SECTION 19. LICENSE. Agent is hereby granted a license or other
right to use, following the occurrence and during the continuance of a Default,
without charge, (a) Grantor's labels, patents, copyrights, trade secrets, trade
names, trademarks, service marks, customer lists and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral, provided that
Agent uses quality standards at least substantially equivalent to those of
Grantor for the manufacture, advertising, sale and distribution of Grantor's
products and services and (b) Grantor's rights under all licenses and all
franchise agreements shall inure to Agent's benefit.
SECTION 20. INJUNCTIVE RELIEF. Grantor recognizes that in the event
Grantor fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Holders of Secured Obligations; therefore, Grantor agrees that the
Holders of Secured Obligations, if Agent so determines and requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
SECTION 21. INTERPRETATION AND INCONSISTENCIES; MERGER.
(a) The rights and duties created by this Agreement shall, in all
cases, be interpreted consistently with, and shall be in addition to (and not in
lieu of), the rights and duties created by the Credit Agreement and the other
Loan Documents. In the event that any provision of this Agreement shall be
inconsistent with any provision of any other Loan Document, such provision of
the other Loan Document shall govern.
(b) Except as provided in subsection (a) above, this Agreement
represents the final agreement of the Grantor and the Agent with respect to the
matters contained herein and may not be contradicted by evidence of prior or
contemporaneous agreements, or subsequent oral agreements, between the Grantor
and the Agent or any other Holder of Secured Obligations.
<PAGE>
SECTION 22. EXPENSES. Grantor will upon demand pay to Agent and/or
the Holders of Secured Obligations the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of their counsel and
of any experts and agents, as provided in SECTION 9.7 of the Credit Agreement.
SECTION 23. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement nor consent to any departure by Grantor herefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
Grantor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 24. NOTICES. All notices and other communications provided
for hereunder shall be delivered in the manner set forth in SECTION 14.1 of the
Credit Agreement.
SECTION 25. CONTINUING SECURITY INTEREST; TERMINATION. (a) Except
as provided in SECTION 25(b), this Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect until the later of the payment or satisfaction in full of the
Obligations (other than contingent indemnity obligations) and the termination
of the Credit Agreement, (ii) be binding upon Grantor, its successors and
assigns and (iii) except to the extent that the rights of any transferor or
assignor are limited by the terms of the Credit Agreement, inure, together
with the rights and remedies of Agent hereunder, to the benefit of Agent and
any of the Holders of Secured Obligations. Nothing set forth herein or in
any other Loan Document is intended or shall be construed to give any other
Person any right, remedy or claim under, to or in respect of this Agreement
or any other Loan Document or any Collateral. Grantor's successors and
assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession thereof or therefor.
(b) Upon the payment in full in cash of the Obligations (other than
contingent indemnity obligations) and the termination of the Credit Agreement,
this Agreement and the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to Grantor. Upon any such termination of
security interest, Grantor shall be entitled to the return, upon its request and
at its expense, of such of the Collateral held by Agent as shall not have been
sold or otherwise applied pursuant to the terms hereof and Agent will, at
Grantor's expense, execute and deliver to Grantor such other documents as
Grantor shall reasonably request to evidence such termination. In connection
with any sales of assets permitted under the Credit Agreement, the Agent will
release and terminate the liens and security interests granted under this
Agreement with respect to such assets.
SECTION 26. SEVERABILITY; NO STRICT CONSTRUCTION.
(a) It is the parties' intention that this Agreement be interpreted
in such a way that it is valid and effective under applicable law. However, if
one or more of the provisions of this Agreement shall for any reason be found to
be invalid or unenforceable, the remaining provisions of this Agreement shall be
unimpaired.
(b) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto and no
<PAGE>
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
SECTION 27. GOVERNING LAW. THE AGENT ACCEPTS THIS AGREEMENT, ON
BEHALF OF ITSELF AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND
AGREEING TO IT THERE. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS. WITHOUT
LIMITING THE FOREGOING, ANY DISPUTE BETWEEN THE GRANTOR AND THE AGENT, ANY
LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
SECTION 28. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES BETWEEN THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL
COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. GRANTOR AGREES THAT THE AGENT, ANY LENDER
OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST
GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1)
OBTAIN PERSONAL JURISDICTION OVER THE GRANTOR OR (2) REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. GRANTOR AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. GRANTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON
HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
<PAGE>
(C) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(D) WAIVER OF BOND. GRANTOR WAIVES THE POSTING OF ANY BOND OTHERWISE
REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT.
(E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 28, WITH ITS COUNSEL.
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
IFR SYSTEMS, INC.
By:
----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as AGENT
By:
----------------------------------
Name:
Title:
Signature Page to Borrower's Security Agreement
<PAGE>
EXHIBIT 10.03
EXECUTION COPY
GUARANTY
This GUARANTY ("Guaranty") is made as of the ___ day of February,
1998, by [_______________], a [___________] corporation (the "Guarantor"), in
favor of the "Holders of Secured Obligations" under (and as defined in) that
certain Credit Agreement, of even date herewith, by and among IFR SYSTEMS, INC.
(the "Borrower"), the financial institutions from time to time parties thereto
(collectively the "Lenders") and The First National Bank of Chicago, in its
capacity as contractual representative for the Holders of Secured Obligations
(the "Agent"). Such Credit Agreement, as it may be amended, modified or
supplemented from time to time, is hereinafter referred to as the "Credit
Agreement". Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Credit Agreement.
1. GUARANTY. (i) For value received and in consideration of any
loan, advance or financial accommodation of any kind whatsoever heretofore, now
or hereafter made, given or granted to the Borrower by the Holders of Secured
Obligations, the Guarantor unconditionally guarantees for the benefit of each of
the Holders of Secured Obligations the full and prompt payment when due, whether
at maturity or earlier, by reason of acceleration or otherwise, and at all times
thereafter, of all of the Secured Obligations (including, without limitation,
interest accruing following the filing of a bankruptcy petition by or against
the Borrower, at the applicable rate specified in the Credit Agreement, whether
or not such interest is allowed as a claim in bankruptcy).
(ii) At any time after the occurrence of a Default, the Guarantor
shall pay to the Agent, for the benefit of the Holders of Secured Obligations,
on demand and in immediately available funds, the full amount of the Secured
Obligations (including any portion thereof which is not yet due and payable).
The Guarantor further agrees to pay to the Agent and reimburse the Agent for, on
demand and in immediately available funds, (a) all losses (including, without
limitation, lost profits), fees, costs and expenses (including, without
limitation, all court costs and attorneys' and paralegals' fees, costs and
expenses) paid or incurred by the Agent or any of the Holders of Secured
Obligations in: (1) endeavoring to collect all or any part of the Secured
Obligations from, or in prosecuting any action against, the Borrower or the
Guarantor relating to the Credit Agreement, this Guaranty or the transactions
contemplated thereby; (2) taking any action with respect to any security or
collateral securing the Secured Obligations or the Guarantor's obligations
hereunder; and (3) preserving, protecting or defending the enforceability of, or
enforcing, this Guaranty or their respective rights hereunder (all such costs
and expenses are hereinafter referred to as the "Expenses") and (b) interest on
(1) the Secured Obligations which do not constitute interest, (2) to the extent
permitted by applicable law, the Secured Obligations which constitute interest,
and (3) the Expenses, from the date of demand under this Guaranty until paid in
full at the per annum rate of interest described in Section 2.11 of the Credit
Agreement (the "Interest Rate"). The Guarantor hereby agrees that this Guaranty
is an absolute guaranty of payment and is not a guaranty of collection.
<PAGE>
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2. OBLIGATIONS UNCONDITIONAL. The Guarantor hereby agrees that its
obligations under this Guaranty shall be unconditional, irrespective of:
(i) the validity, enforceability, avoidance, novation or subordination
of any of the Secured Obligations or any of the Loan Documents;
(ii) the absence of any attempt by, or on behalf of, any Holder of
Secured Obligations or the Agent to collect, or to take any other action to
enforce, all or any part of the Secured Obligations whether from or against
the Borrower, any other guarantor of the Secured Obligations or any other
Person;
(iii) the election of any remedy by, or on behalf of, any Holder of
Secured Obligations or the Agent with respect to all or any part of the
Secured Obligations;
(iv) the waiver, consent, extension, forbearance or granting of any
indulgence by, or on behalf of, any Holder of Secured Obligations or the
Agent with respect to any provision of any of the Loan Documents;
(v) the failure of the Agent to take any steps to perfect and maintain
its security interest in, or to preserve its rights to, any security or
collateral for the Secured Obligations;
(vi) the election by, or on behalf of, any one or more of the Holders
of Secured Obligations, in any proceeding instituted under Chapter 11 of
Title 11 of the United States Code (11 U.S.C. 101 et seq.) (the "Bankruptcy
Code"), of the application of Section 1111(b)(2) of the Bankruptcy Code;
(vii) any borrowing or grant of a security interest by the Borrower,
as debtor-in-possession, under Section 364 of the Bankruptcy Code;
(viii) the disallowance, under Section 502 of the Bankruptcy Code, of
all or any portion of the claims of any of the Holders of Secured
Obligations or the Agent for repayment of all or any part of the Secured
Obligations or any Expenses; or
(ix) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of the Borrower or the Guarantor.
3. ENFORCEMENT; APPLICATION OF PAYMENTS. Upon the occurrence of a
Default, the Agent may proceed directly and at once, without notice, against the
Guarantor to obtain performance of and to collect and recover the full amount,
or any portion, of the Secured Obligations, without first proceeding against the
Borrower or any other Person, or against any security or collateral for the
Secured Obligations. Subject only to the terms and provisions of the Credit
Agreement, the Agent shall have the exclusive right to determine the application
of payments and credits, if any, from the Guarantor, the Borrower or from any
other Person on account of the Secured Obligations or any other liability of the
Guarantor to any Holder of Secured Obligations.
<PAGE>
-3-
4. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants as follows to each Holder of Secured Obligations and the Agent as of
the date hereof:
(i) The Guarantor (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, (b) is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction in which failure to be so qualified and in good standing
could reasonably be expected to have a Material Adverse Effect, and
(c) has all requisite corporate power and authority to own, operate
and encumber its property;
(ii) The Guarantor has the requisite corporate power and
authority to execute, deliver and perform this Guaranty and any other
document required to be delivered by it under the Credit Agreement,
and this Guaranty has been duly executed and delivered and constitutes
the legal, valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with its terms; and
(iii) The execution, delivery and performance of this
Guaranty do not and will not (a) conflict with the Articles of
Incorporation or by-laws of the Guarantor, (b) require any approval of
the Guarantor's shareholders except such as has been obtained, (c)
require any approval or consent of any Person or Governmental
Authority, or under the terms of any material agreement, and (d) will
not result in or require the creation of any lien or security interest
upon or with respect to any of the properties or assets of the
Guarantor other than pursuant to the Loan Documents.
5. WAIVERS. (i) The Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of receivership or
bankruptcy of the Borrower, protest or notice with respect to the Secured
Obligations, all setoffs and counterclaims and all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor and notices of acceptance of this Guaranty, the benefits of all
statutes of limitation, and all other demands whatsoever (and shall not require
that the same be made on the Borrower as a condition precedent to the
Guarantor's obligations hereunder), and covenants that this Guaranty will not be
discharged, except by complete payment (in cash) and performance of the Secured
Obligations and any other obligations contained herein. The Guarantor further
waives all notices of the existence, creation or incurring of new or additional
indebtedness, arising either from additional loans extended to the Borrower or
otherwise, and also waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the Secured Obligations is due, notices of any and all proceedings to
collect from the maker, any endorser or any other guarantor of all or any part
of the Secured Obligations, or from any other Person, and, to the extent
permitted by law, notices of exchange, sale,
<PAGE>
-4-
surrender or other handling of any security or collateral given to the Agent to
secure payment of all or any part of the Secured Obligations.
(ii) The Guarantor understands that it shall be liable for the full
amount of its liability under this Guaranty, notwithstanding foreclosure of any
real property securing all or any part of the Secured Obligations by trustee
sale or any other reason impairing the right of the Guarantor, the Agent or any
of the Holders of Secured Obligations to proceed against the Borrower, any other
guarantor or the Borrower's or such guarantor's property. The Guarantor agrees
that all of its obligations under this Guaranty (including its obligation to pay
in full all indebtedness evidenced by or arising under the Credit Agreement)
shall remain in full force and effect without defense, offset or counterclaim of
any kind, notwithstanding that the Guarantor's rights against the Borrower may
be impaired, destroyed or otherwise affected by reason of any action or inaction
on the part of the Agent or any Holder of Secured Obligations.
(iii) The Guarantor hereby expressly waives the benefits of any law
in any jurisdiction applicable to this Guaranty purporting to allow a guarantor
to revoke a continuing guaranty with respect to any transactions occurring after
the date of the guaranty.
(iv) The Holders of Secured Obligations, either themselves or acting
through the Agent, may from time to time in their sole discretion, without
notice or demand and without affecting the liability of the Guarantor hereunder,
(a) renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the Secured Obligations, or
otherwise modify, amend or change the terms of any of the Loan Documents;
(b) accept partial payments on all or any part of the Secured Obligations;
(c) take and hold security or collateral for the payment of all or any part of
the Secured Obligations, this Guaranty, or any other guaranties of all or any
part of the Secured Obligations or other liabilities of the Borrower, (d)
exchange, enforce, waive and release any such security or collateral; (e) apply
such security or collateral and direct the order or manner of sale thereof as in
their discretion they may determine; (f) settle, release, exchange, enforce,
waive, compromise or collect or otherwise liquidate all or any part of the
Secured Obligations, this Guaranty, any other guaranty of all or any part of the
Secured Obligations, and any security or collateral for the Secured Obligations
or for any such guaranty; and/or (g) otherwise deal with the Borrower or any
other Person that may become liable for all or any part of the Secured
Obligations. Any of the foregoing may be done in any manner, without affecting
or impairing the obligations of the Guarantor hereunder.
6. SETOFF. At any time after all or any part of the Secured
Obligations have become due and payable (by acceleration or otherwise), each
Holder of Secured Obligations and the Agent may, without notice to the Guarantor
and regardless of the acceptance of any security or collateral for the payment
hereof, appropriate and apply toward the payment of all or any part of the
Secured Obligations (i) any indebtedness due or to become due from such Holder
of Secured Obligations or the Agent to the Guarantor, and (ii) any moneys,
credits or other property belonging to the Guarantor, at any time held by or
coming into the possession of such Holder of Secured Obligations or the Agent or
any of their respective affiliates.
7. FINANCIAL INFORMATION. The Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Borrower and any and all endorsers
<PAGE>
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and/or other guarantors of all or any part of the Secured Obligations, and of
all other circumstances bearing upon the risk of nonpayment of the Secured
Obligations, or any part thereof, that diligent inquiry would reveal, and the
Guarantor hereby agrees that none of the Holders of Secured Obligations nor the
Agent shall have any duty to advise the Guarantor of information known to any of
them regarding such condition or any such circumstances. In the event any
Holder of Secured Obligations, in its sole discretion, undertakes at any time or
from time to time to provide any such information to the Guarantor, such Holder
of Secured Obligations shall be under no obligation (i) to undertake any
investigation not a part of its regular business routine, (ii) to disclose any
information which such Holder of Secured Obligations, pursuant to accepted or
reasonable commercial finance or banking practices, wishes to maintain
confidential or (iii) to make any other or future disclosures of such
information or any other information to the Guarantor.
8. NO MARSHALLING; REINSTATEMENT. The Guarantor consents and agrees
that none of the Holders of Secured Obligations nor the Agent nor any Person
acting for or on behalf of the Holders of Secured Obligations or the Agent shall
be under any obligation to marshall any assets in favor of the Guarantor or
against or in payment of any or all of the Secured Obligations. The Guarantor
further agrees that, to the extent that the Borrower, the Guarantor or any other
guarantor of all or any part of the Secured Obligations makes a payment or
payments to any Holder of Secured Obligations or the Agent, or any Holder of
Secured Obligations or the Agent receives any proceeds of Collateral, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to the
Borrower, the Guarantor, such other guarantor or any other Person, or their
respective estates, trustees, receivers or any other party, including, without
limitation, the Guarantor, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
the part of the Secured Obligations which has been paid, reduced or satisfied by
such amount shall be reinstated and continued in full force and effect as of the
time immediately preceding such initial payment, reduction or satisfaction.
9. SUBROGATION. Until the Secured Obligations have been paid in
full, the Guarantor (i) shall have no right of subrogation with respect to such
Secured Obligations and (ii) waives any right to enforce any remedy which the
Holders of Secured Obligations or the Agent (or any of them) now have or may
hereafter have against the Borrower, any endorser or any guarantor of all or any
part of the Secured Obligations or any other Person, and the Guarantor waives
any benefit of, and any right to participate in, any security or collateral
given to the Holders of Secured Obligations and the Agent (or any of them) to
secure the payment or performance of all or any part of the Secured Obligations
or any other liability of the Borrower to the Holders of Secured Obligations.
10. SUBORDINATION. The Guarantor agrees that any and all claims of
the Guarantor against the Borrower, any endorser or any other guarantor of all
or any part of the Secured Obligations, or against any of their respective
properties, shall be subordinate and subject in right of payment to the prior
payment, in full and in cash, of all Secured Obligations. Notwithstanding any
right of the Guarantor to ask, demand, sue for, take or receive any payment from
the Borrower, all rights, liens and security interests of the Guarantor, whether
now or hereafter arising and howsoever existing, in any assets of the Borrower
(whether constituting part of the security or collateral given to any Holder of
<PAGE>
-6-
Secured Obligations or the Agent to secure payment of all or any part of the
Secured Obligations or otherwise) shall be and hereby are subordinated to the
rights of the Holders of Secured Obligations and the Agent in those assets. The
Guarantor shall have no right to possession of any such asset or to foreclose
upon any such asset, whether by judicial action or otherwise, unless and until
all of the Secured Obligations shall have been fully paid and satisfied and all
financing arrangements between the Borrower and the Holders of Secured
Obligations have been terminated. If all or any part of the assets of the
Borrower, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of the Borrower, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, or if the business of the Borrower is dissolved or if
substantially all of the assets of the Borrower are sold, then, and in any such
event, any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any indebtedness of the Borrower to the Guarantor ("Borrower
Indebtedness") shall be paid or delivered directly to the Agent for application
on any of the Secured Obligations, due or to become due, until such Secured
Obligations shall have first been fully paid and satisfied. The Guarantor
irrevocably authorizes and empowers the Agent to demand, sue for, collect and
receive every such payment or distribution and give acquittance therefor and to
make and present for and on behalf of the Guarantor such proofs of claim and
take such other action, in the Agent's own name or in the name of the Guarantor
or otherwise, as the Agent may deem necessary or advisable for the enforcement
of this Guaranty. The Agent may vote such proofs of claim in any such
proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Secured Obligations. Should any
payment, distribution, security or instrument or proceeds thereof be received by
the Guarantor upon or with respect to the Borrower Indebtedness prior to the
satisfaction of all of the Secured Obligations and the termination of all
financing arrangements between the Borrower and the Holders of Secured
Obligations, the Guarantor shall receive and hold the same in trust, as trustee,
for the benefit of the Holders of Secured Obligations and shall forthwith
deliver the same to the Agent, for the benefit of the Holders of Secured
Obligations, in precisely the form received (except for the endorsement or
assignment of the Guarantor where necessary), for application to any of the
Secured Obligations, due or not due, and, until so delivered, the same shall be
held in trust by the Guarantor as the property of the Holders of Secured
Obligations. If the Guarantor fails to make any such endorsement or assignment
to the Agent, the Agent or any of its officers or employees are hereby
irrevocably authorized to make the same. The Guarantor agrees that until the
Secured Obligations have been paid in full (in cash) and satisfied and all
financing arrangements between the Borrower and the Holders of Secured
Obligations have been terminated, the Guarantor will not assign or transfer to
any Person any claim the Guarantor has or may have against the Borrower.
11. ENFORCEMENT; AMENDMENTS; WAIVERS. No delay on the part of any of
the Holders of Secured Obligations or the Agent in the exercise of any right or
remedy arising under this Guaranty, the Credit Agreement, any of the other Loan
Documents or otherwise with respect to all or any part of the Secured
Obligations, the Collateral or any other guaranty of or security for all or any
part of the Secured Obligations shall operate as a waiver thereof, and no single
or partial exercise by any such Person of any such right or remedy shall
preclude any further exercise thereof. No modification or waiver of any of the
<PAGE>
-7-
provisions of this Guaranty shall be binding upon the Holders of Secured
Obligations or the Agent, except as expressly set forth in a writing duly signed
and delivered by the party making such modification or waiver. Failure by any
of the Holders of Secured Obligations or the Agent at any time or times
hereafter to require strict performance by the Borrower, the Guarantor, any
other guarantor of all or any part of the Secured Obligations or any other
Person of any of the provisions, warranties, terms and conditions contained in
any of the Loan Documents now or at any time or times hereafter executed by such
Persons and delivered to the Agent or any Holder of Secured Obligations shall
not waive, affect or diminish any right of the Agent or such Holder of Secured
Obligations at any time or times hereafter to demand strict performance thereof
and such right shall not be deemed to have been waived by any act or knowledge
of the Agent or any Holder of Secured Obligations, or their respective agents,
officers or employees, unless such waiver is contained in an instrument in
writing, directed and delivered to the Borrower or the Guarantor, as applicable,
specifying such waiver, and is signed by the party or parties necessary to give
such waiver under the Credit Agreement. No waiver of any Default by the Agent
or any Holder of Secured Obligations shall operate as a waiver of any other
Default or the same Default on a future occasion, and no action by the Agent or
any Holder of Secured Obligations permitted hereunder shall in any way affect or
impair the Agent's or any Holder of Secured Obligations's rights and remedies or
the obligations of the Guarantor under this Guaranty. Any determination by a
court of competent jurisdiction of the amount of any principal and/or interest
owing by the Borrower to any of the Holders of Secured Obligations shall be
conclusive and binding on the Guarantor irrespective of whether the Guarantor
was a party to the suit or action in which such determination was made.
12. EFFECTIVENESS; TERMINATION. This Guaranty shall become effective
upon its execution by the Guarantor and shall continue in full force and effect
and may not be terminated or otherwise revoked until the Secured Obligations
shall have been fully paid (in cash) and discharged and the Credit Agreement and
all financing arrangements between the Borrower and the Holders of Secured
Obligations shall have been terminated. If, notwithstanding the foregoing, the
Guarantor shall have any right under applicable law to terminate or revoke this
Guaranty, the Guarantor agrees that such termination or revocation shall not be
effective until a written notice of such revocation or termination, specifically
referring hereto, signed by the Guarantor, is actually received by the Agent.
Such notice shall not affect the right and power of any of the Holders of
Secured Obligations or the Agent to enforce rights arising prior to receipt
thereof by the Agent. If any Holder of Secured Obligations grants loans or
takes other action after the Guarantor terminates or revokes this Guaranty but
before the Agent receives such written notice, the rights of such Holder of
Secured Obligations with respect thereto shall be the same as if such
termination or revocation had not occurred.
13. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor and upon its successors and assigns and shall inure to the benefit of
the Holders of Secured Obligations and the Agent and their respective successors
and assigns; all references herein to the Borrower and to the Guarantor shall be
deemed to include their respective successors and assigns. The successors and
assigns of the Guarantor and the Borrower shall include, without limitation,
their respective receivers, trustees or debtors-in-possession. All references
to the singular shall be deemed to include the plural where the context so
requires.
<PAGE>
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14. OFFICER AUTHORITY. The Guarantor authorizes its Chairman,
President, and each of its Executive Vice Presidents and Vice Presidents,
respectively, from time to time, severally and not jointly, on behalf and in the
name of the Guarantor from time to time in the discretion of such officer, to
take or omit to take any and all action and to execute and deliver any and all
documents and instruments which such officer may determine to be necessary or
desirable in relation to, and perform any obligations arising in connection
with, this Guaranty and any of the transactions contemplated hereby, and,
without limiting the generality of the foregoing, hereby gives to each such
officer severally the power and right on behalf of the Guarantor, without notice
to or assent by the Guarantor, to do all or any of the following: (i) to execute
and deliver any amendment, waiver, consent, supplement, other modification or
reaffirmation of this Guaranty or any document relating hereto, and to perform
any obligation arising in connection herewith or therewith; (ii) to sell,
transfer, assign, encumber or otherwise deal in or with any security for this
Guaranty or any part thereof; (iii) to grant liens, security interests or other
encumbrances on or in respect of any property or assets of the Guarantor,
whether now owned or hereafter acquired, in favor of the Holders of Secured
Obligations and the Agent; (iv) to send notices, directions, orders and other
communications to any Person relating to this Guaranty, or any security for all
or any part of the Secured Obligations; (v) to take or omit to take any other
action contemplated by or referred to in this Guaranty or any document covering
any security for all or any part of the Secured Obligations; and (vi) to take or
omit to take any action with respect to this Guaranty, any security for all or
any part of the Secured Obligations or any document covering any such security,
all as such officer may determine in his or her sole discretion. The
undersigned hereby certifies that he/she has all necessary authority to grant
and execute this Guaranty on behalf of the Guarantor.
15. GOVERNING LAW. THIS GUARANTY HAS BEEN EXECUTED AND DELIVERED BY
THE PARTIES HERETO IN CHICAGO, ILLINOIS. THIS GUARANTY SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS. WITHOUT LIMITING THE FOREGOING, ANY DISPUTE BETWEEN THE AGENT AND THE
GUARANTOR ARISING OUT OF OR RELATED TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM
IN CONNECTION WITH THIS GUARANTY, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
16. CONSENT TO JURISDICTION; COUNTERCLAIMS; FORUM NON CONVENIENS.
(a) EXCLUSIVE JURISDICTION. Except as provided in SUBSECTION (b) of this
SECTION 16, the Agent, on behalf of itself and the Holders of Secured
Obligations, and the Guarantor agree that all disputes between them arising out
of or related to the relationship established between them in connection with
this Guaranty, whether arising in contract, tort, equity, or otherwise, shall be
resolved only by state or federal courts located in Chicago, Illinois, but the
parties acknowledge that any appeals from those courts may have to be heard by a
court located outside of Chicago, Illinois.
(b) OTHER JURISDICTIONS. The Agent shall have the right to proceed
against the Guarantor or its real or personal property in a court in any
location to enable the Agent to obtain personal jurisdiction over the Guarantor
or to enforce a judgment or other court order entered in favor of the Agent.
The Guarantor shall not assert any permissive counterclaims in any proceeding
brought by the Agent under this CLAUSE (b) arising out of or relating to this
Guaranty.
<PAGE>
-9-
(c) VENUE; FORUM NON CONVENIENS. Each of the Guarantor and the Agent
waives any objection that it may now or hereafter have (including, without
limitation, any objection to the laying of venue or based on FORUM NON
CONVENIENS) to the location of the court in which any proceeding with respect to
this Guaranty or any other document executed or delivered in connection herewith
is commenced in accordance with this SECTION 16.
17. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND THE AGENT WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN THE AGENT AND THE GUARANTOR ARISING OUT OF OR RELATED TO
THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EITHER THE GUARANTOR
OR THE AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTY WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
18. WAIVER OF BOND. The Guarantor waives the posting of any bond
otherwise required of the Agent in connection with any judicial process or
proceeding to realize on the Collateral (including, without limitation, the real
property Collateral) or any other security for the Obligations or to enforce any
judgment or other court order entered in favor of the Agent, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Guaranty or any other agreement or document between the Agent
and the Guarantor.
19. ADVICE OF COUNSEL. The Guarantor represents and warrants that it
has consulted with its legal counsel regarding all waivers under this Guaranty,
including without limitation those under SECTION 5 and SECTIONS 15 through 18
hereof, that it believes that it fully understands all rights that it is waiving
and the effect of such waivers, that it assumes the risk of any misunderstanding
that it may have regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Agent and the Holders of Secured
Obligations to extend the indebtedness guaranteed hereby.
20. NOTICES. All notices and other communications required or
desired to be served, given or delivered hereunder shall be in writing or by a
telecommunications device capable of creating a printed record and shall be
addressed to the party to be notified as follows:
if to the Guarantor, at:
[____________________]
10200 West York Street
Wichita, KS 67215
Attention: Chief Financial Officer
Telecopy: (316) 522-3022
<PAGE>
-10-
if to the Agent, at
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670-0323
Attention: Donna Rae Green
Telecopy: 312/732-7655
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (i) three (3) days following
deposit in the United States mails, with proper postage prepaid; (ii) upon
delivery thereof if delivered by hand to the party to be notified; (iii) upon
delivery thereof to a reputable overnight courier service, with delivery charges
prepaid; or (iv) upon confirmation of receipt thereof if transmitted by a
telecommunications device.
21. SEVERABILITY. Wherever possible, each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
22. MERGER. This Guaranty represents the final agreement of the
Guarantor with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between the Guarantor and the Agent or any Holder of Secured
Obligations.
23. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
24. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
<PAGE>
-11-
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the day and year first set forth above.
[ ]
----------------------------------
By:
--------------------------------
Name:
Title:
Acknowledged and agreed to
as of the ___ day of February, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
Name:
Title:
Signature Page to [______________] Guaranty
<PAGE>
EXECUTION COPY EXHIBIT 10.04
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of February
5, 1998, is executed by and between IFR SYSTEMS, INC., a Delaware corporation
(the "Pledgor"), and The First National Bank of Chicago, as "Agent" for itself
and for the "Holders of Secured Obligations" under the Credit Agreement defined
below. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings ascribed to such terms in the "Credit Agreement"
(as defined below).
WITNESSETH:
WHEREAS, the Pledgor, the Agent and certain financial institutions
from time to time party thereto (the "Lender") have entered into a certain
Credit Agreement of even date herewith (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), pursuant to which
the Lenders have agreed, subject to certain conditions precedent, to make loans
and other financial accommodations to the Pledgor from time to time;
WHEREAS, the Pledgor owns all of the issued and outstanding Capital
Stock of those corporations (the "Subsidiaries"), described on EXHIBIT A hereto;
and
WHEREAS, the Agent and the Lenders have required, as a condition to
their entering into the Credit Agreement, that the Pledgor execute and deliver
this Pledge Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the agreements
described hereinabove or otherwise) heretofore, now or hereafter made to or for
the benefit of the Pledgor pursuant to the Credit Agreement or any other
agreement, instrument or document executed pursuant to or in connection
therewith, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor and the Agent hereby
agree as follows:
1. PLEDGE. The Pledgor hereby pledges to the Agent, for the benefit
of the Agent and the Holders of Secured Obligations, and grants to the Agent for
the benefit of the Agent and the Holders of Secured Obligations, a security
interest in, the following (collectively, the "Pledged Collateral"):
(a) The investment property consisting of the shares of the Capital
Stock of the Subsidiaries, now or at any time or times hereafter owned by
the Pledgor, and the certificates representing the shares of such Capital
Stock (such now-owned shares being identified on EXHIBIT A attached hereto
and made a part hereof), all options, warrants and other forms of
investment property for the purchase of shares of the stock of the
Subsidiaries now or hereafter held in the name of the Pledgor (all of said
Capital Stock, options and warrants and all Capital Stock held in the name
of the Pledgor as a result of the exercise of such options or warrants
being hereinafter collectively referred to as the "Pledged Stock"),
herewith delivered to the Agent accompanied by stock powers in the
<PAGE>
form of EXHIBIT B attached hereto and made a part hereof (the "Powers")
duly executed in blank, and all dividends, cash, instruments, investment
property and other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any or all of the
Pledged Stock;
(b) All additional shares of Capital Stock of the Subsidiaries from
time to time acquired by the Pledgor in any manner, and the certificates
representing such additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Agent is irrevocably
authorized to amend EXHIBIT A from time to time to reflect such additional
shares), and all options, warrants, other forms of investment property,
dividends, cash, instruments and other rights and options from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(c) The property and interests in property described in SECTION 3 and
SECTION 7 below; and
(d) All proceeds of the foregoing.
2. SECURITY FOR LIABILITIES. The Pledged Collateral secures the
prompt payment, performance and observance of (i) the Secured Obligations and
(ii) the Pledgor's obligations and liabilities under this Pledge Agreement and
each agreement, document or instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations and liabilities of the Pledgor
and the Subsidiaries now or hereafter existing being hereinafter referred to as
the "Liabilities").
3. PLEDGED COLLATERAL ADJUSTMENTS. If, during the term of this
Pledge Agreement:
(a) Any stock dividend, reclassification, readjustment or other
change is declared or made in the capital structure of the Subsidiaries, or
any option included within the Pledged Collateral is exercised, or both, or
(b) Any subscription warrants or any other rights or options shall be
issued in connection with the Pledged Collateral,
then all new, substituted and additional shares, warrants, rights, options,
other securities, or other investment property acquired or issued by reason of
any of the foregoing, shall be immediately delivered to and held by the Agent
under the terms of this Pledge Agreement and shall constitute Pledged Collateral
hereunder; PROVIDED, HOWEVER, that nothing contained in this SECTION 3 shall be
deemed to permit any stock dividend, issuance of additional stock, warrants,
rights or options, reclassification, readjustment or other change in the capital
structure of the Subsidiaries which is not expressly permitted in the Credit
Agreement.
4. SUBSEQUENT CHANGES AFFECTING PLEDGED COLLATERAL. The Pledgor
represents and warrants that it has made its own arrangements for keeping itself
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that neither the Agent nor any of the Holders of
Secured Obligations shall have any obligation to inform the Pledgor of any such
changes or potential
<PAGE>
changes or to take any action or omit to take any action with respect thereto.
The Agent may, after the occurrence of a Default, without notice and at its
option, transfer or register the Pledged Collateral or any part thereof into its
or its nominee's name with or without any indication that such Pledged
Collateral is subject to the security interest hereunder. In addition, the
Agent may at any time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of smaller or larger
denominations.
5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the sole legal and beneficial owner of 100% of the
issued and outstanding Capital Stock of the Subsidiaries as set forth on
EXHIBIT A, free and clear of any Lien except for the security interest
created by this Pledge Agreement;
(b) The Pledgor has full corporate power and authority to enter into
this Pledge Agreement;
(c) There are no restrictions upon the voting rights associated with,
or upon the transfer of, any of the Pledged Collateral;
(d) The Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Pledged Collateral free of any
Liens;
(e) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
either (i) for the pledge of the Pledged Collateral pursuant to this Pledge
Agreement or for the execution, delivery or performance of this Pledge
Agreement by the Pledgor or (ii) for the exercise by the Agent of the
voting or other rights provided for in this Pledge Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such disposition by
laws affecting the offering and sale of securities generally);
(f) The pledge of the Pledged Collateral pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, in favor of the Agent for the benefit of the Agent
and the Holders of Secured Obligations, securing the payment and
performance of the Liabilities; and
(g) The Powers are duly executed and give the Agent the authority
they purport to confer; and
(h) The Pledgor's chief executive office is located at 10220 West
York Street, Wichita, KS 67215-8999, and Pledgor shall not change the
location of its chief executive office without giving the Agent thirty (30)
days prior written notice.
6. VOTING RIGHTS. During the term of this Pledge Agreement, and
except as provided in this SECTION 6 below, the Pledgor shall have the right to
vote the Pledged Stock on all corporate questions in a manner not inconsistent
with the terms of this Pledge Agreement, the Credit Agreement and any other
agreement, instrument or document executed pursuant thereto or
<PAGE>
in connection therewith. After the occurrence of a Default, the Agent or the
Agent's nominee may, at the Agent's or such nominee's option and following
written notice from the Agent to the Pledgor, exercise all voting powers
pertaining to the Pledged Collateral, including the right to take action by
shareholder consent. Such authorization shall constitute an irrevocable voting
proxy from the Pledgor to the Agent or, at the Agent's option, to the Agent's
nominee.
7. DIVIDENDS AND OTHER DISTRIBUTIONS. (a) So long as no Default or
Unmatured Event of Default shall have occurred:
(i) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral, PROVIDED,
HOWEVER, that any and all
(A) dividends and interest paid or payable other than in cash
with respect to, and instruments and other property received,
receivable or otherwise distributed with respect to, or in exchange
for, any of the Pledged Collateral;
(B) dividends and other distributions paid or payable in cash
with respect to any of the Pledged Collateral on account of a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed with respect to
principal of, or in redemption of, or in exchange for, any of the
Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the Agent
to hold, for the benefit of the Agent and the Holders of Secured
Obligations, as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the Agent, for the benefit of the Agent and the
Holders of Secured Obligations, be segregated from the other property or
funds of the Pledgor, and be delivered immediately to the Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement); and
(ii) The Agent shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
receive the dividends or interest payments which it is authorized to
receive and retain pursuant to CLAUSE (i) above.
(b) After the occurrence of a Default or a Unmatured Event of Default and
upon receipt by the Borrower of written notice from the Agent of the Agent's
election to have any of the following clauses apply:
(i) All rights of the Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to SECTION 7(a)(i) hereof shall cease, and all such rights shall
thereupon become vested in the Agent, for the benefit of the Agent and the
Holders of Secured Obligations, which shall thereupon have the sole right
to receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of CLAUSE (i) of this SECTION 7(b) shall
be received in trust for the
<PAGE>
Agent, for the benefit of the Agent and the Holders of Secured Obligations,
shall be segregated from other funds of the Pledgor and shall be paid over
immediately to the Agent as Pledged Collateral in the same form as so
received (with any necessary endorsements);
(iii) The Pledgor shall, upon the request of the Agent, at Pledgor's
expense, execute and deliver, and cause the Subsidiaries and their
respective, officers and directors to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts
and things, as may be necessary or, in the opinion of the Agent, the
Pledgor or their respective counsel, advisable to register the applicable
Pledged Collateral under the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and to exercise its best efforts to cause
the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the
related prospectus which, in the opinion of the Agent, the Pledgor or their
respective counsel, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(iv) The Pledgor shall, upon the request of the Agent, at Pledgor's
expense, use its best efforts to qualify the Pledged Collateral under state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as requested by the
Agent;
(v) The Pledgor shall, upon the request of the Agent, at the
Pledgor's expense, cause the Subsidiaries to make available to the holders
of its securities, as soon as practicable, earnings statements which will
satisfy the provisions of Section 11(a) of the Securities Act; and
(vi) The Pledgor shall, upon the request of the Agent, at the
Pledgor's expense, do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Collateral or any part
thereof valid and binding and in compliance with applicable law.
The Pledgor will reimburse the Agent and/or the Holders of Secured Obligations
for all expenses incurred by the Agent and/or the Holders of Secured
Obligations, including, without limitation, reasonable attorneys' and
accountants' fees and expenses in connection with the foregoing. Upon or at any
time after the occurrence of a Default, if the Agent determines that, prior to
any public offering of any securities constituting part of the Pledged
Collateral, such securities should be registered under the Securities Act and/or
registered or qualified under any other federal or state law and such
registration and/or qualification is not practicable, then the Pledgor agrees
that it will be commercially reasonable if a private sale, upon at least ten
(10) Business Days' notice to the Pledgor, is arranged so as to avoid a public
offering, even though the sales price established and/or obtained at such
private sale may be substantially less then prices which could have been
obtained for such security on any market or exchange or in any other public
sale.
8. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not
(i) sell or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral without the prior written consent of the Agent, or (ii)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Pledge Agreement.
<PAGE>
9. FINANCING STATEMENTS. To the extent permitted by applicable law,
the Pledgor hereby authorizes the Agent to file financing or continuation
statements and amendments thereto disclosing the security interest granted to
the Agent under this Pledge Agreement without the Pledgor's signature appearing
thereon, and the Agent agrees to notify the Pledgor when such a filing has been
made. The Pledgor agrees that a carbon, photographic, photostatic, or other
reproduction of this Pledge Agreement or of a financing statement is sufficient
as a financing statement.
10. REMEDIES. (a) The Agent shall have, in addition to any other
rights given under this Pledge Agreement or by law, all of the rights and
remedies with respect to the Pledged Collateral of a secured party under the
Uniform Commercial Code as in effect in the State of Illinois. After the
occurrence of a Default and following written notice to the Pledgor, the Agent
(personally or through an agent) is hereby authorized and empowered to transfer
and register in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, to exercise all voting rights with respect thereto, to
collect and receive all cash dividends and other distributions made thereon, and
to otherwise act with respect to the Pledged Collateral as though the Agent were
the outright owner thereof, the Pledgor hereby irrevocably constitutes and
appoints the Agent as the proxy and attorney-in-fact of the Pledgor, with full
power of substitution to do so; PROVIDED, that the Agent agrees not to exercise
such powers as attorney-in-fact unless a Default has occurred and is continuing;
PROVIDED, HOWEVER, that the Agent shall have no duty to exercise any such right
or to preserve the same and shall not be liable for any failure to do so or for
any delay in doing so. In addition, after the occurrence of a Default, the
Agent shall have such powers of sale and other powers as may be conferred by
applicable law. With respect to the Pledged Collateral or any part thereof
which shall then be in or shall thereafter come into the possession or custody
of the Agent or which the Agent shall otherwise have the ability to transfer
under applicable law, the Agent may, in its sole discretion, without notice
except as specified below, after the occurrence of a Default, sell or cause the
same to be sold at any exchange, broker's board or at public or private sale, in
one or more sales or lots, at such price as the Agent may deem best, for cash or
on credit or for future delivery, without assumption of any credit risk, and the
purchaser of any or all of the Pledged Collateral so sold shall thereafter own
the same, absolutely free from any claim, encumbrance or right of any kind
whatsoever. The Agent and each of the Holders of Secured Obligations may, in
its own name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable law, buy the
Pledged Collateral at any private sale. The Pledgor will pay to the Agent all
reasonable expenses (including, without limitation, court costs and reasonable
attorneys' and paralegals' fees and expenses) of, or incidental to, the
enforcement of any of the provisions hereof. The Agent agrees to distribute any
proceeds of the sale of the Pledged Collateral in accordance with the Credit
Agreement and the Pledgor shall remain liable for any deficiency following the
sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline
speedily in value or is or becomes of a type sold on a recognized market, the
Agent will give the Pledgor reasonable notice of the time and place of any
public sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of banks,
commercial finance companies, insurance companies or other financial
institutions disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable. Notwithstanding any provision to the
contrary contained herein, the Pledgor agrees that any requirements of
reasonable notice shall be
<PAGE>
met if such notice is received by the Pledgor as provided in SECTION 26 below at
least five (5) Business Days before the time of the sale or disposition;
provided, however, that Agent may give any shorter notice that is commercially
reasonable under the circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after a Default, the Pledgor agrees that after the
occurrence of a Default, the Agent may, from time to time, attempt to sell all
or any part of the Pledged Collateral by means of a private placement
restricting the bidders and prospective purchasers to those who are qualified
and will represent and agree that they are purchasing for investment only and
not for distribution. In so doing, the Agent may solicit offers to buy the
Pledged Collateral, or any part of it, from a limited number of investors deemed
by the Agent, in its reasonable judgment, to be financially responsible parties
who might be interested in purchasing the Pledged Collateral. If the Agent
solicits such offers from not less than four (4) such investors, then the
acceptance by the Agent of the highest offer obtained therefrom shall be deemed
to be a commercially reasonable method of disposing of such Pledged Collateral;
provided, however, that this Section does not impose a requirement that the
Agent solicit offers from four or more investors in order for the sale to be
commercially reasonable.
11. SECURITY INTEREST ABSOLUTE. All rights of the Agent and the
Holders of Secured Obligations and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(i) Any lack of validity or enforceability of the Credit Agreement or
any other agreement or instrument relating thereto;
(ii) Any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Liabilities, or any other amendment
or waiver of or any consent to any departure from the Credit Agreement;
(iii) Any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any part of the Liabilities; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Liabilities or of this Pledge Agreement.
12. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints
the Agent its attorney-in-fact, with full authority, in the name of the Pledgor
or otherwise, from time to time in the Agent's sole discretion, to take any
action and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including,
without limitation, to receive, endorse and collect all instruments made payable
to the Pledgor representing any dividend, interest payment or other distribution
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same and to arrange for the transfer of all or any part of the
Pledged Collateral on the books of the Subsidiaries to the name of the Agent or
the Agent's nominee; PROVIDED, that the Agent agrees not to exercise such powers
as attorney-in-fact unless a Default has occurred and is continuing.
<PAGE>
13. WAIVERS. (i) The Pledgor waives presentment and demand for
payment of any of the Liabilities, protest and notice of dishonor or Default
with respect to any of the Liabilities and all other notices to which the
Pledgor might otherwise be entitled except as otherwise expressly provided
herein or in the Credit Agreement.
(ii) The Pledgor understands and agrees that its obligations and
liabilities under this Pledge Agreement shall remain in full force and effect,
notwithstanding foreclosure of any real property securing all or any part of the
Secured Obligations by trustee sale or any other reason impairing the right of
the Pledgor, the Agent or any of the Holders of Secured Obligations to proceed
against the Pledgor, any other guarantor or the Pledgor's or such guarantor's
property. The Pledgor agrees that all of its obligations under this Pledge
Agreement shall remain in full force and effect without defense, offset or
counterclaim of any kind.
(iii) The Pledgor hereby expressly waives the benefits of any law in
any jurisdiction applicable to this Pledge Agreement purporting to allow a
guarantor or pledgor to revoke a continuing guaranty or pledge with respect to
any transactions occurring after the date of the guaranty or pledge.
(iv) The Pledgor hereby irrevocably waives all rights of subrogation
(whether contractual, under Section 509 of the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code"), under common law or
otherwise, to the claims of the Agent and the Holders of Secured Obligations
against the Borrower and all contractual, statutory or common law rights of
contribution, reimbursement, indemnification and similar rights and "claims" (as
such term is defined in the Bankruptcy Code) against the Borrower which arise,
or may arise, in connection with, or as a result of, this Pledge Agreement.
14. TERM. This Pledge Agreement shall remain in full force and
effect until the Liabilities have been fully and indefeasibly paid in cash and
the Credit Agreement has terminated pursuant to its terms. Upon the termination
of this Pledge Agreement as provided above (other than as a result of the sale
of the Pledged Collateral), the Agent will release the security interest created
hereunder and, if it then has possession of the Pledged Stock, will deliver the
Pledged Stock and the Powers to the Pledgor.
15. DEFINITIONS. The singular shall include the plural and vice
versa and any gender shall include any other gender as the context may require.
Terms used herein but not defined in this Pledge Agreement or the Credit
Agreement shall have the meaning accorded such terms under the Uniform
Commercial Code, as the same may, from time to time, be in effect in the State
of Illinois.
16. SUCCESSORS AND ASSIGNS. This Pledge Agreement shall be binding
upon and inure to the benefit of the Pledgor, the Agent, for the benefit of
itself and the Holders of Secured Obligations, and their respective successors
and assigns. The Pledgor's successors and assigns shall include, without
limitation, a receiver, trustee or debtor-in-possession of or for the Pledgor.
17. GOVERNING LAW. THIS PLEDGE AGREEMENT HAS BEEN EXECUTED AND
DELIVERED BY THE PARTIES HERETO IN CHICAGO, ILLINOIS. ANY DISPUTE BETWEEN THE
AGENT AND THE PLEDGOR ARISING OUT OF OR RELATED TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN
<PAGE>
CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF ILLINOIS.
18. CONSENT TO JURISDICTION; COUNTERCLAIMS; FORUM NON CONVENIENS.
(a) EXCLUSIVE JURISDICTION. Except as provided in SUBSECTION (b) of this
SECTION 18, the Agent, on behalf of itself and the Holders of Secured
Obligations, and the Pledgor agree that all disputes between them arising out of
or related to the relationship established between them in connection with this
Pledge Agreement, whether arising in contract, tort, equity, or otherwise, shall
be resolved only by state or federal courts located in Chicago, Illinois, but
the parties acknowledge that any appeals from those courts may have to be heard
by a court located outside of Chicago, Illinois.
(b) OTHER JURISDICTIONS. The Agent shall have the right to proceed
against the Pledgor or its real or personal property in a court in any location
to enable the Agent to obtain personal jurisdiction over the Pledgor, to realize
on the Pledged Collateral or any other security for the Liabilities or to
enforce a judgment or other court order entered in favor of the Agent. The
Pledgor shall not assert any permissive counterclaims in any proceeding brought
by the Agent arising out of or relating to this Pledge Agreement.
(c) VENUE; FORUM NON CONVENIENS. Each of the Pledgor and the Agent
waives any objection that it may have (including, without limitation, any
objection to the laying of venue or based on FORUM NON CONVENIENS) to the
location of the court in which any proceeding is commenced in accordance with
this SECTION 18.
19. RESERVED.
20. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE AGENT WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN THE AGENT AND THE PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EITHER THE
PLEDGOR OR THE AGENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS PLEDGE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
21. WAIVER OF BOND. The Pledgor waives the posting of any bond
otherwise required of the Agent in connection with any judicial process or
proceeding to realize on the Collateral or any other security for the
Liabilities, to enforce any judgment or other court order entered in favor of
the Agent, or to enforce by specific performance, temporary restraining order,
or preliminary or permanent injunction, this Pledge Agreement or any other
agreement or document between the Agent and the Pledgor.
22. ADVICE OF COUNSEL. The Pledgor represents and warrants to the
Agent and the Holders of Secured Obligations that it has consulted with its
legal counsel regarding all waivers under this Pledge Agreement, including
without limitation those under SECTION 13 and SECTIONS 17
<PAGE>
through 21 hereof, that it believes that it fully understands all rights that it
is waiving and the effect of such waivers, that it assumes the risk of any
misunderstanding that it may have regarding any of the foregoing, and that it
intends that such waivers shall be a material inducement to the Agent and the
Holders of Secured Obligations to extend the indebtedness secured hereby.
23. SEVERABILITY. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Pledge Agreement shall be held to
be prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
24. FURTHER ASSURANCES. The Pledgor agrees that it will cooperate
with the Agent and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take all such other actions, including, without limitation, the execution
and filing of financing statements, as the Agent may reasonably request from
time to time in order to carry out the provisions and purposes of this Pledge
Agreement.
25. THE AGENT'S DUTY OF CARE. The Agent shall not be liable for any
acts, omissions, errors of judgment or mistakes of fact or law including,
without limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection with the
Agent's (i) gross negligence or willful misconduct, or (ii) failure to use
reasonable care with respect to the safe custody of the Pledged Collateral in
the Agent's possession. Without limiting the generality of the foregoing, the
Agent shall be under no obligation to take any steps necessary to preserve
rights in the Pledged Collateral against any other parties but may do so at its
option. All expenses incurred in connection therewith shall be for the sole
account of the Pledgor, and shall constitute part of the Liabilities secured
hereby.
26. NOTICES. All notices and other communications required or
desired to be served, given or delivered hereunder shall be made in writing or
by a telecommunications device capable of creating a written record and shall be
addressed to the party to be notified as follows:
if to the Pledgor, at
IFR Systems, Inc.
10220 West York Street
Wichita, KS 67215-8999
Attention: Chief Financial Officer
Telecopy: (316) 522-3022
if to the Agent, at
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670-0088
Attention: Donna Rae Green
Telecopy: (312) 732-7655
<PAGE>
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (i) three (3) days following
deposit in the United States mails, with proper postage prepaid; (ii) upon
delivery thereof if delivered by hand to the party to be notified; (iii) upon
delivery thereof to a reputable overnight courier service, with delivery charges
prepaid; or (iv) upon transmission thereof with confirmation of successful
transmission from the sending telecommunications device, if sent by
telecommunications device.
27. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent pursuant to the terms of the Credit Agreement, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
28. SECTION HEADINGS. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
29. EXECUTION IN COUNTERPARTS. This Pledge Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall together constitute one and the same agreement.
30. MERGER. This Pledge Agreement represents the final agreement of
the Pledgor with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or subsequent
oral agreements, between the Pledgor and the Agent or any Holder of Secured
Obligations.
31. NO STRICT CONSTRUCTION. THE PARTIES HERETO HAVE PARTICIPATED
JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS PLEDGE AGREEMENT. IN THE EVENT
AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS PLEDGE
AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY THE PARTIES HERETO AND NO
PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY PARTY BY
VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS PLEDGE AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, THE PLEDGOR AND THE AGENT HAVE EXECUTED THIS
PLEDGE AGREEMENT AS OF THE DATE SET FORTH ABOVE.
IFR SYSTEMS, INC.
BY:
-----------------------------
NAME:
TITLE:
THE FIRST NATIONAL BANK OF CHICAGO, AS AGENT
BY:
-----------------------------
NAME:
TITLE:
SIGNATURE PAGE TO BORROWER PLEDGE AGREEMENT
<PAGE>
ACKNOWLEDGMENT
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE FOREGOING
PLEDGE AGREEMENT, AGREES PROMPTLY TO NOTE ON ITS BOOKS THE SECURITY INTERESTS
GRANTED UNDER SUCH PLEDGE AGREEMENT, AND WAIVES ANY RIGHTS OR REQUIREMENT AT ANY
TIME HEREAFTER TO RECEIVE A COPY OF SUCH PLEDGE AGREEMENT IN CONNECTION WITH THE
REGISTRATION OF ANY PLEDGED COLLATERAL IN THE NAME OF THE AGENT OR ITS NOMINEE
OR THE EXERCISE OF VOTING RIGHTS BY THE AGENT OR ITS NOMINEE.
THE UNDERSIGNED WAIVES ALL RIGHTS IT MAY HAVE UNDER SECTION 8-402 OF
THE UNIFORM COMMERCIAL CODE OR OTHER APPLICABLE LAW AS TO THE GENUINENESS AND
EFFECTIVENESS OF EACH INSTRUCTION OR INDORSEMENT WITH RESPECT TO THE PLEDGED
COLLATERAL, INCLUDING, WITHOUT LIMITATION, FOR ANY GUARANTEE OF THE SIGNATURE ON
THE STOCK POWER(S) OR OTHER DOCUMENTS EXECUTED.
- -------------------------------
[ ]
------------------------
BY:
----------------------
NAME:
TITLE:
<PAGE>
ACKNOWLEDGMENT
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE FOREGOING
PLEDGE AGREEMENT, AGREES PROMPTLY TO NOTE ON ITS BOOKS THE SECURITY INTERESTS
GRANTED UNDER SUCH PLEDGE AGREEMENT, AND WAIVES ANY RIGHTS OR REQUIREMENT AT ANY
TIME HEREAFTER TO RECEIVE A COPY OF SUCH PLEDGE AGREEMENT IN CONNECTION WITH THE
REGISTRATION OF ANY PLEDGED COLLATERAL IN THE NAME OF THE AGENT OR ITS NOMINEE
OR THE EXERCISE OF VOTING RIGHTS BY THE AGENT OR ITS NOMINEE.
THE UNDERSIGNED WAIVES ALL RIGHTS IT MAY HAVE UNDER SECTION 8-402 OF
THE UNIFORM COMMERCIAL CODE OR OTHER APPLICABLE LAW AS TO THE GENUINENESS AND
EFFECTIVENESS OF EACH INSTRUCTION OR INDORSEMENT WITH RESPECT TO THE PLEDGED
COLLATERAL, INCLUDING, WITHOUT LIMITATION, FOR ANY GUARANTEE OF THE SIGNATURE ON
THE STOCK POWER(S) OR OTHER DOCUMENTS EXECUTED.
- -------------------------
[ ]
------------------------
BY:
-----------------------
NAME:
TITLE:
<PAGE>
ACKNOWLEDGMENT
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE FOREGOING
PLEDGE AGREEMENT, AGREES PROMPTLY TO NOTE ON ITS BOOKS THE SECURITY INTERESTS
GRANTED UNDER SUCH PLEDGE AGREEMENT, AND WAIVES ANY RIGHTS OR REQUIREMENT AT ANY
TIME HEREAFTER TO RECEIVE A COPY OF SUCH PLEDGE AGREEMENT IN CONNECTION WITH THE
REGISTRATION OF ANY PLEDGED COLLATERAL IN THE NAME OF THE AGENT OR ITS NOMINEE
OR THE EXERCISE OF VOTING RIGHTS BY THE AGENT OR ITS NOMINEE.
THE UNDERSIGNED WAIVES ALL RIGHTS IT MAY HAVE UNDER SECTION 8-402 OF
THE UNIFORM COMMERCIAL CODE OR OTHER APPLICABLE LAW AS TO THE GENUINENESS AND
EFFECTIVENESS OF EACH INSTRUCTION OR INDORSEMENT WITH RESPECT TO THE PLEDGED
COLLATERAL, INCLUDING, WITHOUT LIMITATION, FOR ANY GUARANTEE OF THE SIGNATURE ON
THE STOCK POWER(S) OR OTHER DOCUMENTS EXECUTED.
- -------------------------
[ ]
------------------------
BY:
-----------------------
NAME:
TITLE:
<PAGE>
ACKNOWLEDGMENT
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE FOREGOING
PLEDGE AGREEMENT, AGREES PROMPTLY TO NOTE ON ITS BOOKS THE SECURITY INTERESTS
GRANTED UNDER SUCH PLEDGE AGREEMENT, AND WAIVES ANY RIGHTS OR REQUIREMENT AT ANY
TIME HEREAFTER TO RECEIVE A COPY OF SUCH PLEDGE AGREEMENT IN CONNECTION WITH THE
REGISTRATION OF ANY PLEDGED COLLATERAL IN THE NAME OF THE AGENT OR ITS NOMINEE
OR THE EXERCISE OF VOTING RIGHTS BY THE AGENT OR ITS NOMINEE.
THE UNDERSIGNED WAIVES ALL RIGHTS IT MAY HAVE UNDER SECTION 8-402 OF
THE UNIFORM COMMERCIAL CODE OR OTHER APPLICABLE LAW AS TO THE GENUINENESS AND
EFFECTIVENESS OF EACH INSTRUCTION OR INDORSEMENT WITH RESPECT TO THE PLEDGED
COLLATERAL, INCLUDING, WITHOUT LIMITATION, FOR ANY GUARANTEE OF THE SIGNATURE ON
THE STOCK POWER(S) OR OTHER DOCUMENTS EXECUTED.
- -------------------------
[ ]
------------------------
BY:
-----------------------
NAME:
TITLE:
<PAGE>
EXHIBIT A
TO
PLEDGE AGREEMENT
DATED AS OF FEBRUARY 5, 1998
PLEDGED STOCK CERTIFICATES
<TABLE>
<CAPTION>
Percentage of Shares of
Issued and Outstanding Capital Stock owned by
Stock owned the Pledgor Subject
Name by the Pledgor to Pledge
- --------------------------------------------------------------------------
<S> <C> <C>
IFR Instruments, Inc. 100% 1,000
PK Technology, Inc. 100% 1,000
Marconi Instruments, Inc. 100% 6,000
IFR Finance, Inc. 100% 500,000
</TABLE>
<PAGE>
EXHIBIT B
to
PLEDGE AGREEMENT
dated as of February 5, 1998
FORM OF STOCK POWER
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to _____________________________ _____ Shares of Common Stock of
________________________, a ________________________ corporation, represented by
Certificate No. __ (the "Stock"), standing in the name of the undersigned on the
books of said corporation and does hereby irrevocably constitute and appoint
___________________________________ as the undersigned's true and lawful
attorney, for it and in its name and stead, to sell, assign and transfer all or
any of the Stock, and for that purpose to make and execute all necessary acts of
assignment and transfer thereof; and to substitute one or more persons with like
full power, hereby ratifying and confirming all that said attorney or substitute
or substitutes shall lawfully do by virtue hereof.
Dated:
------------------
IFR SYSTEMS, INC.
By:
-------------------------
Title:
<PAGE>
EXECUTION COPY
EQUITABLE SHARE CHARGE
BETWEEN
IFR SYSTEMS, INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO
SIDLEY & AUSTIN
Royal Exchange
London EC3V 3LE
Ref: JM/HW/DOC2.WPD
Tel: 0171 360 3600
Fax: 0171 626 7937
<PAGE>
THIS DEED OF CHARGE is made the 5th day of February, 1998
BETWEEN:
(1) IFR SYSTEMS, INC., a Delaware corporation of 10200 West York Street,
Wichita, Kansas, USA (the "CHARGOR"); and
(2) THE FIRST NATIONAL BANK OF CHICAGO a national banking association with its
principal place of business at One First National Plaza, Chicago, Illinois
60670, in its capacity as contractual representative for itself and the
other Lenders under the Credit Agreement (as defined below) (the
"CHARGEE").
NOW THIS DEED WITNESSETH AS FOLLOWS:
I. DEFINITIONS AND INTERPRETATION
A. Words and expressions defined in the Credit Agreement (as defined below)
shall, in the absence of express indication to the contrary and save where
the context or subject matter otherwise requires, have the same meanings when
used in this Deed.
A. The following expressions shall bear the following meanings for the
purposes of this Deed:-
"CHARGED PROPERTY" means:-
(i) the Securities;
(ii) all dividends, distributions and other income paid or payable
on or derived from the Securities;
(iii) all shares or other property derived from the Securities
(whether by way of bonus, option or otherwise); and
(iv) all other accretions, rights, benefits and advantages of all
kinds accruing, offered or otherwise derived from the Securities
(whether by way of conversion, redemption, bonus, preference, option,
offer or otherwise);
"CREDIT AGREEMENT" means the credit agreement dated as of 5 February, 1998
(as amended, supplemented or otherwise modified from time to time) made
between the Chargor (the "BORROWER"), the institutions from time to time a
party thereto as Lenders (the "LENDERS") and the Chargee as contractual
representative for itself and the other Lenders;
<PAGE>
"ENCUMBRANCE" means any mortgage, charge, assignment, pledge, lien, right
of set-off, encumbrance or other security interest (whether fixed or
floating) whatsoever;
"EVENT OF DEFAULT" means a Default (as defined in Article VIII of the
Credit Agreement);.
"INDEBTEDNESS" means the Obligations of the Chargor under the Credit
Agreement.
"SECURITIES" means 65 per cent of the issued share capital of IFR Systems
Limited (company number 3491978) represented by share certificate number 2;
A. References to the parties to the Credit Agreement or this Deed include
such other persons as may from time to time assume, in accordance with the
terms of the Credit Agreement or this Deed, rights and obligations of any
such party (or their successors) thereunder or hereunder.
A. References to any statute or statutory provision or order or regulation
made hereunder include that statute, provision, order or regulation as
amended, modified, re-enacted or replaced from time to time.
A. References to persons shall include bodies corporate and unincorporate,
associations, state entities (or any agency thereof), partnerships and
individuals.
A. Headings to clauses are for information only and shall not form part of
the operative provisions of this Deed or the Schedules and shall be ignored
in construing the same.
A. References to Recitals, Clauses or Schedules are to recitals to, clauses
of or schedules to this Deed.
A. References in this Deed to any agreement, deed or document (including,
without limitation, references to this Deed) shall be deemed to include
references to such agreement, deed or document as varied, amended, modified,
supplemented or replaced from time to time.
I. COVENANT TO PAY
A. The Chargor covenants that it will pay the Indebtedness to the Chargee in
accordance with the Credit Agreement.
I. CHARGING CLAUSE
A. As continuing security for the payment to the Chargee of the
Indebtedness, the Chargor with full title guarantee hereby charges in favour
of the Chargee all of the
<PAGE>
Chargor's interest in and to the Charged Property with the intent that such
charge will take effect as a first equitable charge and shall rank ahead of
any other present or future security on the Charged Property.
I. TRANSFER OF SHARES
A. Forthwith upon execution of this Deed the Chargor shall deliver to the
Chargee all stock and share certificates and other documents of title
(including a certified true and correct copy of the register of members of
IFR Systems Limited) relating to the Securities together with stock transfer
forms executed in blank and left undated on the basis that the Chargee (or
its nominee) shall be entitled to hold such documents of title and stock
transfer forms until the Indebtedness has been irrevocably and
unconditionally discharged in full and shall be entitled, at any time if an
Event of Default shall have occurred and be continuing, to complete (pursuant
to its powers in Clause 12 below) the stock transfer forms on behalf of the
Chargee in favour of itself or such other person as it shall select.
I. DIVIDENDS AND VOTING RIGHTS
A. So long as no Event of Default shall have occurred and be continuing
(excluding for this purpose an Event of Default which shall have been waived
in writing by the Chargee or remedied to the satisfaction of the Chargee):
1. the Chargor shall be entitled to receive and retain all cash dividends,
distributions and other moneys paid on or derived from the Securities;
1. the Chargor shall be entitled to exercise all voting and other rights
and powers attaching to the Securities provided that it shall not exercise
any such voting rights or powers in a manner prejudicial to the interests of
the Chargee under this Deed and in particular, without limiting the
foregoing, the Chargor shall not exercise any voting rights or powers if such
exercise would result in the Securities representing less than 65 per cent in
value of the entire issued share capital of IFR Systems Limited.
A. The rights and powers attaching to the Securities shall, for the
purposes of Clause 5.1(b), include, without limitation, all powers given to
trustees by Section 10(3) and 10(4) of the Trustee Act 1925 (in respect of
securities subject to a trust) and shall be exercisable without any need for
any further consent or authority of the Chargor.
A. At any time when the Securities are registered in the name of the
Chargee or its nominee the Chargee shall not be under any duty to ensure that
any dividends, distributions or other moneys payable in respect of the
Securities are duly and promptly paid or received by it or its nominee or to
verify that the correct amounts are paid or received or to take any action in
connection with the taking up of any (or any offer of any) stocks, shares,
rights, moneys or other property paid, distributed, accruing or offered at
any time by way of interest, dividend, redemption, bonus, rights, preference,
option, warrant or otherwise on, or in respect of, or in substitution for,
any of the Securities.
<PAGE>
I. RELEASE AND DISCHARGE
A. At such time as all the Indebtedness under the Credit Agreement has been
unconditionally and irrevocably discharged in full, neither the Chargee nor
the Lenders has any further contingent obligations to lend or grant or create
any other commitment or liabilities under or in connection with the Credit
Agreement or any instruments or documents related or issued pursuant thereto
and the Credit Agreement has been terminated or has no further effect, this
Deed and the security interest granted hereby shall terminate and the Chargee
shall release all the right, title and interest of the Chargee in the Charged
Property. Upon any such termination of security interest, the Chargor shall
be entitled to the return, upon its request and at its expense, of such of
the Charged Property held by the Chargee as shall not have been sold or
otherwise applied pursuant to the terms hereof and the Chargee will, at the
Chargor's expense, execute and deliver to the Chargor such other documents as
the Chargor shall reasonably request to evidence such termination. In
connection with any sales of the Charged Property, as permitted under the
Credit Agreement, the Chargee will release and terminate the liens and
security interest granted under this Deed with respect to such asset.
I. CONTINUING SECURITY
A. This security is to be a continuing security, notwithstanding any
intermediate payment or settlement of account or other matter or thing
whatsoever and in particular the intermediate satisfaction by the Borrower of
the whole or any part of the Indebtedness and is to be in addition, and
without prejudice, to any other security or securities which the Chargee, or
the Lenders or any of them may now or hereafter hold for the Indebtedness or
any part thereof and this security may be enforced against the Chargor
without first having recourse to any other rights of the Chargee.
I. FURTHER ASSURANCE
A. The Chargor undertakes, from time to time and at all times, whether
before or after the security constituted hereunder shall have become
enforceable, to execute and do at its own expense all such deeds, assurances,
agreements, instruments, acts and things as the Chargee may reasonably
require for perfecting and protecting the security hereby constituted or
facilitating the realisation thereof or otherwise for enforcing the same or
exercising any of the Chargee's rights hereunder and in particular, but
without limitation, the Chargor shall execute all transfers, conveyances,
assignments and assurances whatsoever and give all notices, orders,
instructions and directions whatsoever which the Chargee may deem reasonably
necessary or advisable in the exercise of its rights hereunder.
<PAGE>
I. NEGATIVE PLEDGE
A. During the continuance of this security the Chargor shall not (except as
provided in the Credit Agreement):
1. create or permit to subsist any Encumbrance on or over all or any part
of the Charged Property or the right to receive or be paid the same or agree
to do so; or
1. sell, transfer or otherwise dispose of the whole or any part of the
Charged Property or the right to receive or to be paid the same or agree to
do so; or
1. dispose of the equity of redemption in respect of any of the Charged
Property.
I. REPRESENTATIONS
A. The Chargor represents and warrants to the Chargee on the date hereof as
follows:
1. that it is the sole, direct, unfettered, legal and beneficial owner of
the Securities; and
1. that the Securities have been duly authorised and are fully paid up,
free from any Encumbrance (other than this charge) and not subject to any
option and represent 65 per cent. in nominal value of the entire issued
share capital of IFR Systems Limited.
I. UNDERTAKING
A. The Chargor hereby undertakes that, forthwith upon the issue by IFR
Systems Limited of any additional shares in favour of the Chargor, the
Chargor will execute and deliver in favour of the Chargee (as agent for
itself and the Lenders) a pledge supplemental to this Deed in respect of such
shares, in a form reasonably acceptable to the Chargee, to the intent that at
all times 65 per cent. in nominal value of the entire issued share capital
of IFR Systems Limited shall constitute the Securities then securing the
Indebtedness.
I. ATTORNEY
A. The Chargor hereby irrevocably and by way of security appoints the
Chargee and any person nominated for the purpose by the Chargee in writing
under hand by an officer of the Chargee severally as its Attorney and in its
name and on its behalf and as its act and deed to execute as a deed and
deliver (using the company seal where appropriate) and otherwise perfect and
do any deed, assurance, agreement, instrument, transfer, act or thing which
may be required or deemed proper in the exercise of any rights or powers
hereunder or otherwise for any of the purposes of this Deed and the Chargor
hereby covenants with the Chargee to ratify and confirm all acts or things
made, done or executed by such attorney as aforesaid.
<PAGE>
I. ENFORCEMENT OF SECURITY
A. The restriction on the consolidation of mortgages imposed by Section 93
of the Law of Property Act 1925 shall not apply to this Deed.
A. Section 103 of the Law of Property Act 1925 shall not apply to the
charges created by this Deed which shall immediately become enforceable and
the power of sale and other powers conferred by Section 101 of such Act (as
varied or extended by this Deed) shall be immediately exercisable at any time
after notice demanding payment of any sum in respect of the Indebtedness
shall have been given by the Chargee to the Chargor following the occurrence
and during the continuance of an Event of Default.
A. The powers conferred on mortgagees or receivers by the Law of Property
Act 1925 and the Insolvency Act 1986 shall apply to the security constructed
by this Deed except insofar as they are expressly or impliedly excluded and
where there is ambiguity or conflict between the powers contained in such
Acts and those contained in this Deed, those contained in this Deed shall
prevail.
I. PROTECTION OF THIRD PARTIES
A. No purchaser from, or other person dealing with, the Chargee shall be
concerned to enquire whether any of the powers which it has exercised or
purported to exercise has arisen or become exercisable, or whether any of the
Indebtedness remains outstanding, or whether any event has happened to
authorise the Chargee to act or as to the propriety or validity of the
exercise or purported exercise of any such power; and the title of such a
purchaser and the position of such a person shall not be impeachable by
reference to any of those matters.
A. The receipt of the Chargee shall be an absolute and conclusive discharge
to a purchaser and shall relieve him of any obligation to see to the
application of any moneys paid to or by the direction of the Chargee.
A. In Clauses 14.1 and 14.2, "purchaser" includes any person acquiring, for
money or money's worth, any Encumbrance over, or any other interest or right
whatsoever in relation to, any of the Charged Property.
I. PROTECTION OF CHARGEE
A. The Chargee shall not be liable in respect of any loss or damage which
arises out of the exercise, or the attempted or purported exercise of, or the
failure to exercise any of its powers, unless such loss or damage is caused
by its gross negligence or wilful default or misconduct.
<PAGE>
I. OTHER SECURITY, CUMULATIVE POWERS AND AVOIDANCE OF PAYMENTS
A. This security is in addition to, and shall neither be merged in, nor in
any way exclude or prejudice, or be affected by any other security interest,
right of recourse or other right whatsoever (or the invalidity thereof) which
the Chargee may now or at any time hereafter hold or have (or would apart
from this security hold or have) as regards the Chargor or any other person
in respect of the Indebtedness.
A. The powers which this Deed confers on the Chargee are cumulative,
without prejudice to its powers under the general law, and may be exercised
as often as the Chargee thinks appropriate; the Chargee may, in connection
with the exercise of its powers, join or concur with any person in any
transaction, scheme or arrangement whatsoever; and the Chargor acknowledges
that the respective powers of the Chargee shall in no circumstances
whatsoever be suspended, waived or otherwise prejudiced by anything other
than an express waiver or variation in writing.
A. If any amount paid by the Borrowers or any of them in respect of the
Indebtedness is avoided or set aside on the liquidation or administration of
the Chargor or otherwise, then for the purposes of this Deed such amount
shall not be considered to have been paid.
I. SUSPENSE ACCOUNT
A. All moneys received, recovered or realised by the Chargee under this
Deed (including the proceeds of any conversion of currency) may in the
discretion of the Chargee be credited to an interest-bearing suspense or
impersonal account and may be held in such account for so long as the Chargee
may think fit pending their application from time to time (as the Chargee
shall be entitled to do in its discretion) in or towards the discharge of the
Indebtedness or any part thereof and save as provided herein no party shall
be entitled to withdraw any amount at any time standing to the credit of any
suspense or impersonal account referred to above.
I. CURRENCY LAWS
A. All moneys received or held by the Chargee under this Deed may be
converted into such other currency in which the obligations and liabilities
comprised in the Indebtedness were denominated at the rate of exchange then
prevailing for purchasing that other currency with the existing currency in
accordance with the Chargee's customary practice for the exchange of
currencies.
A. No payment to the Chargee (whether under any judgment or court order or
otherwise) shall discharge the obligation or liability of the Chargor in
respect of which it was made unless and until the Chargee shall have received
payment in full in the currency in which the obligation or liability was
incurred (the "ORIGINAL CURRENCY"). In the event of any payment made in a
currency other than the Original Currency ("OTHER CURRENCY"), such obligation
or liability shall be discharged only to the extent
<PAGE>
that on the Business Day following receipt by the Chargee of such payment in
such Other Currency the Chargee may in accordance with normal banking
procedures purchase the Original Currency with such Other Currency: if the
amount of the Original Currency so purchased is less than the sum originally
due to the Chargee in the Original Currency, the Chargee shall have a
further separate course of action against the Chargor and shall be entitled
to enforce the security constituted by this Deed to recover the amount of the
shortfall.
I. CERTIFICATES
A. For all purposes, including any legal proceedings, a certificate signed
by one of the Chargee's officers as to the amount of the Indebtedness (or any
part thereof) shall, in the absence of manifest error, be prima facie
evidence thereof against the Chargor.
I. WAIVER
A. No delay or omission of the Chargee in exercising any right, power or
privilege hereunder shall impair such right, power or privilege or be
construed as a waiver of such right, power or privilege nor shall any single
or partial exercise of any such right, power or privilege preclude any
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies of the Chargee herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
A. A waiver given or consent granted by the Chargee under this Deed will be
effective only if given in writing and then only in the instance and for the
purpose for which it is given.
I. INVALIDITY
A. If at any time any one or more of the provisions of this Deed is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions hereof
shall not be in any way affected or impaired thereby.
I. DELEGATION
A. The Chargee may delegate by power of attorney or in any other manner all
or any of the powers, authorities and discretions which are for the time
being exercisable by the Chargee under this Deed to any person or persons
which it shall think fit.
I. REDEMPTION OF PRIOR CHARGES
A. The Chargee may at any time following an Event of Default redeem any and
all prior Encumbrances on or relating to the Charged Property or any part
thereof or procure the transfer of such Encumbrances to itself and may settle
and pass the accounts of the person or persons entitled to the prior
Encumbrances. Any account so settled and passed shall be conclusive and
binding on the Chargor.
<PAGE>
I. ASSIGNMENT
A. The Chargee may assign all or any of its rights under this Deed to any
substitute contractual representative or any other person acting on behalf of
any of the Lenders.
I. NOTICES
A. Save as specifically otherwise provided in this Deed, the provisions of
Section 14.1 of the Credit Agreement shall apply to any notice, demand or
other communication to be served under this Deed. For the purposes hereof,
the address and facsimile number of each party hereto shall be as shown
immediately after its name on the signature page of this Deed or at such
other address or number as it may from time to time notify in writing to the
other party.
I. DEED
A. The parties hereto intend this agreement to take effect as a deed.
I. GOVERNING LAW
A. The Deed shall be governed by and construed in accordance with English
law.
A. The Chargor for the benefit of the Chargee irrevocably agrees that the
High Court of Justice in London is to hear and determine any disputes which
may arise out of or in connection with this Deed and that accordingly any
suit, action or proceedings arising out of or in connection with this Deed
("PROCEEDINGS") may be brought in such Court and the Chargor irrevocably
submits to such jurisdiction for the purpose of any such Proceedings, but
without prejudice to the right of the Chargee to bring Proceedings in any
other appropriate jurisdiction or the right to take Proceedings in more than
one jurisdiction (whether concurrently or not).
A. Each of the Chargor and the Chargee irrevocably agrees that any writ,
notice or other document issued in connection with or for the purpose of any
Proceedings in the English Courts shall be duly served upon it if delivered
or sent by registered post to the following person, namely:
In respect of the Chargor:
Name: Any partner of Boodle Hatfield
Position:
Address: 61 Brook Street, London W1Y 2BL
<PAGE>
In respect of the Chargee:
Name: David Lindop
Position: Senior Vice President and Senior Credit
Officer
Address: First Chicago/ NBD London Branch, 1 Triton
Square, London
A. The Chargor irrevocably agrees that a judgment in any Proceedings
brought in the English Courts shall be conclusive and binding (subject to any
appeal it may bring) upon it and may be enforced in the courts of any other
jurisdiction. The Chargor irrevocably waives any objection it may now or
hereafter have to the laying of venue of any Proceedings brought in the
English Courts and any claim it may now or hereafter have that any such
Proceedings have been brought in an inconvenient forum.
A. The Chargor consents generally in respect of any Proceedings to the
giving of any relief or the issue of any process in connection with such
Proceedings including, without limitation, the making, enforcement or
execution against any of its property whatsoever (irrespective of its use or
intended use) of any order or judgment which may be made or given in such
Proceedings.
I. COUNTERPARTS
This Deed may be executed in any number of copies which taken together
shall constitute a single deed.
IN WITNESS whereof this Deed has been duly executed and delivered the day and
year first above written.
<PAGE>
EXECUTED as a DEED by )
IFR SYSTEMS, INC. )
)
.......................................
.............................................
director director/secretary
NOTICE DETAILS: are as provided for in the Credit Agreement
<PAGE>
EXECUTED as a DEED by )
THE FIRST NATIONAL BANK OF CHICAGO )
acting by its duly authorised officer(s) )
.......................................
.............................................
officer officer
NOTICE DETAILS: as set out in the Credit Agreement
AND COPIES TO:
Address: Sidley & Austin
One First National Plaza
Chicago
Illinois 60603
U.S.A.
Facsimile: (312) 853 7036
Attention of: James Clark
<PAGE>
CONTENTS
Clause No. Page No.
- ------------------------
1. DEFINITIONS AND INTERPRETATION 1
2. COVENANT TO PAY 2
3. CHARGING CLAUSE 2
4. TRANSFER OF SHARES 3
5. DIVIDENDS AND VOTING RIGHTS 3
6. RELEASE AND DISCHARGE 4
7. CONTINUING SECURITY 4
8. FURTHER ASSURANCE 4
9. NEGATIVE PLEDGE 5
10. REPRESENTATIONS 5
11. UNDERTAKING 5
12. ATTORNEY 5
13. ENFORCEMENT OF SECURITY 6
14. PROTECTION OF THIRD PARTIES 6
15. PROTECTION OF CHARGEE 6
16. OTHER SECURITY, CUMULATIVE POWERS AND
AVOIDANCE OF PAYMENTS 7
17. SUSPENSE ACCOUNT 7
18. CURRENCY LAWS 7
19. CERTIFICATES 8
20. WAIVER 8
21. INVALIDITY 8
<PAGE>
22. DELEGATION 8
23. REDEMPTION OF PRIOR CHARGES 8
24. ASSIGNMENT 9
25 NOTICES 9
26. DEED 9
27. GOVERNING LAW 9
28. COUNTERPARTS 10
<PAGE>
S&A DRAFT: 01/27/98
COPYRIGHT SECURITY AGREEMENT
THIS COPYRIGHT SECURITY AGREEMENT ("Agreement") is made as of
February __, 1998, by and between [______________], a ___________ corporation
("Grantor"), and The First National Bank of Chicago, as contractual
representative (the "Agent") for its benefit and the benefit of the "Holders
of Secured Obligations" (as such term is defined in the "Credit Agreement"
defined below).
W I T N E S S E T H:
WHEREAS, IFR Systems, Inc., a Delaware corporation (the
"Borrower"), the Agent and certain financial institutions from time to time
party thereto (the "Lenders") are parties to that certain Credit Agreement of
even date herewith (as the same may hereafter be modified, amended, restated
or supplemented from time to time, the "Credit Agreement"), pursuant to which
the Lenders may, from time to time, extend credit to Borrower; and
WHEREAS, Grantor and the Agent are parties to that certain Security
Agreement of even date herewith (as the same may hereafter be modified,
amended, restated or supplemented from time to time, the "Security
Agreement"), pursuant to which Grantor has granted a security interest in
certain of its assets to the Agent for the benefit of the Agent and the
Holders of Secured Obligations; and
WHEREAS, the Lenders have required Grantor to execute and deliver
this Agreement (i) in order to secure the prompt and complete payment,
observance and performance of all of the "Secured Obligations" (as defined in
the Credit Agreement) and (ii) as a condition precedent to any extension of
credit to the Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees as follows:
1. DEFINED TERMS.
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning
specified for such term in the Credit Agreement. Unless otherwise defined
herein or in the Credit Agreement, each capitalized term used herein that is
defined in the Security Agreement shall have the meaning specified for such
term in the Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular
<PAGE>
provision of this Agreement, and section references are to this Agreement
unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and VICE VERSA, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a
part hereof.
3. INCORPORATION OF THE CREDIT AGREEMENT. The Credit Agreement
and the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN COPYRIGHTS. To secure the complete and
timely payment, performance and satisfaction of all of the Secured
Obligations, Grantor hereby grants to the Agent, for the benefit of the
Holders of Secured Obligations, a security interest in, as and by way of a
first mortgage and security interest having priority over all other security
interests, with power of sale to the extent permitted by applicable law, all
of Grantor's now owned or existing and hereafter acquired or arising:
(i) copyrights, whether or not published or registered under the
Copyright Act of 1976, 17 U.S.C. Section 101 et seq., as the same shall
be amended from time to time, and any predecessor or successor statute
thereto, and applications for registration of copyrights, and all works
of authorship and other intellectual property rights therein, including,
without limitation, copyrights for computer programs, source code and
object code data bases and related materials and documentation and
including, without limitation, the registered copyrights and copyright
applications listed on SCHEDULE A attached hereto and made a part
hereof, and (a) all renewals, revisions, derivative works, enhancements,
modifications, updates, new releases or other revisions thereof, (b) all
income, royalties, damages and payments now and hereafter due and/or
payable with respect thereto, including, without limitation, payments
under all licenses entered into in connection therewith and damages and
payments for past or future infringements thereof, (c) the right to sue
for past, present and future infringements thereof, (d) the goodwill of
Grantor's business symbolized by the foregoing and connected therewith,
and (e) all of Grantor's rights corresponding thereto throughout the
world (all of the foregoing copyrights and applications, together with
the items described in CLAUSES (a)-(e), being sometimes hereinafter
individually and/or collectively referred to as the "Copyrights"); and
(ii) license agreements with any other party now or hereafter
entered into in connection with any Copyrights or such other party's
copyrights or copyright registrations or applications, whether the
Grantor is a licensor or licensee under any such license agreement,
including, without limitation, the license agreements listed on SCHEDULE
B attached hereto and made a part hereof, and the right to use the
foregoing in connection with the enforcement of the Agent's and the
Holders of Secured Obligations' rights under the Credit Agreement,
including, without limitation, the right to prepare for sale or
distribution and sell, copy, as permitted, or distribute any and all
Inventory now and hereafter owned by Grantor and now or hereafter
covered by such license (all of the foregoing being hereinafter referred
to collectively as the "Licenses"). Notwithstanding
<PAGE>
the foregoing provisions of this SECTION 4, the Licenses shall not include
any license agreement in effect as of the date hereof which by its terms
prohibits the grant of the security contemplated by this Agreement;
provided, however, that upon the termination of such prohibitions for any
reason whatsoever, the provisions of this SECTION 4 shall be deemed to
apply thereto automatically; and
(iii) copyrightable materials now or hereafter owned by Grantor,
all tangible property embodying the Copyrights or such copyrightable
materials, and all tangible property covered by the Licenses.
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without
the Agent's prior written consent, enter into any agreement, including,
without limitation, any license agreement, which is inconsistent with this
Agreement, and Grantor further agrees that it will not take any action, and
will use its best efforts not to permit any action to be taken by others,
including, without limitation, licensees, or fail to take any action, which
would in any respect affect the validity or enforcement of the rights
transferred to the Agent under this Agreement or the rights associated with
the Copyrights or Licenses.
6. NEW COPYRIGHTS AND LICENSES. Grantor represents and warrants
that, from and after the Closing Date, (a) the Copyrights listed on SCHEDULE
A include all of the registered copyrights and applications for registration
of copyrights in connection therewith now owned or held by Grantor, (b) the
Licenses listed on SCHEDULE B include all of the copyright license agreements
under which Grantor is the licensee or licensor and (c) no liens, claims or
security interests in such Copyrights and Licenses have been granted by
Grantor to any Person other than the Agent. If, prior to the termination of
this Agreement, Grantor shall (i) obtain rights to any new copyrights,
registered copyrights, or copyright applications, (ii) become entitled to the
benefit of any copyrights, registered copyrights, copyright applications,
copyright licenses or copyright license renewals, whether as licensee or
licensor, or (iii) enter into any new copyright license agreement, the
provisions of PARAGRAPH 4 above shall automatically apply thereto. Grantor
shall give to the Agent written notice of events described in CLAUSES (i),
(ii) and (iii) of the preceding sentence promptly after the occurrence
thereof, but in any event not less frequently than on a quarterly basis.
Grantor hereby authorizes the Agent to modify this Agreement unilaterally (i)
by amending SCHEDULE A to include any future copyrights, registered
copyrights and copyright applications and by amending SCHEDULE B to include
any future copyright license agreements which are Copyrights or Licenses
under PARAGRAPH 4 above or under this PARAGRAPH 6, and (ii) by filing, in
addition to and not in substitution for this Agreement, a duplicate original
of this Agreement containing on Schedule A or B thereto, as the case may be,
such future copyrights, registered copyrights, copyright applications and
copyright license agreements.
7. ROYALTIES. Grantor hereby agrees that the use by the Agent of
the Copyrights and Licenses as authorized hereunder in connection with the
Agent's exercise of its rights and remedies under PARAGRAPH 15 or pursuant to
Section 17 of the Security Agreement shall be coextensive with Grantor's
rights thereunder and with respect thereto and without any liability for
royalties or other related charges from the Agent or the other Holders of
Secured Obligations to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS.
The Agent may at all reasonable times (and at any time when an Unmatured Default
or Default exists) have
<PAGE>
access to, examine, audit, make copies (at Grantor's expense) and extracts
from and inspect Grantor's premises and examine Grantor's books, records and
operations relating to the Copyrights and Licenses; PROVIDED, that in
conducting such inspections and examinations, the Agent shall use reasonable
efforts not to disturb unnecessarily the conduct of Grantor's ordinary
business operations. Grantor agrees not to sell or assign its respective
interests in, or grant any license under, the Copyrights or the Licenses
without the prior and express written consent of the Agent.
9. NATURE AND CONTINUATION OF THE AGENT'S SECURITY INTEREST;
TERMINATION OF THE AGENT'S SECURITY INTEREST. This Agreement is made for
collateral security purposes only. This Agreement shall create a continuing
security interest in the Copyrights and Licenses and shall terminate only
when the Secured Obligations have been paid in full in cash and the Credit
Agreement and the Security Agreement have been terminated. When this
Agreement has terminated, the Agent shall promptly execute and deliver to
Grantor, at Grantor's expense, all termination statements and other
instruments as may be necessary or proper to terminate the Agent's security
interest in the Copyrights and the Licenses, subject to any disposition
thereof which may have been made by the Agent pursuant to this Agreement or
the Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (i) prosecute
diligently any copyright application included in the Copyrights, (ii) make
application for registration of such uncopyrighted but copyrightable material
as Grantor deems appropriate, (iii) place notices of copyright on all
property embodying the Copyrights and use its best efforts to have its
licensees do the same and (iv) take all reasonable and necessary action to
preserve and maintain all of Grantor's rights in the Copyrights and Licenses
including, without limitation, making timely filings for renewals and
extensions and diligently monitoring unauthorized use thereof. Any expenses
incurred in connection with the foregoing shall be borne by Grantor. Neither
the Agent nor any of the Holders of Secured Obligations shall have any duty
with respect to the Copyrights and Licenses. Without limiting the generality
of the foregoing, neither the Agent nor any of the Holders of Secured
Obligations shall be under any obligation to take any steps necessary to
preserve rights in the Copyrights or Licenses against any other parties, but
the Agent may do so at its option from and after the occurrence of a Default,
and all expenses incurred in connection therewith shall be for the sole
account of Grantor and shall be added to the Secured Obligations secured
hereby.
11. THE AGENT'S RIGHT TO SUE. From and after the occurrence of a
Default, the Agent shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Copyrights and the Licenses and, if the
Agent shall commence any such suit, Grantor shall, at the request of the
Agent, do any and all lawful acts and execute any and all proper documents
required by the Agent in aid of such enforcement. Grantor shall, upon
demand, promptly reimburse the Agent for all costs and expenses incurred by
the Agent in the exercise of its rights under this PARAGRAPH 11 (including,
without limitation, reasonable fees and expenses of attorneys and paralegals
for the Agent).
12. WAIVERS. The Agent's failure, at any time or times hereafter,
to require strict performance by Grantor of any provision of this Agreement
shall not waive, affect or diminish any right of the Agent thereafter to
demand strict compliance and performance therewith nor shall any course of
dealing between Grantor and the Agent have such effect. No single or partial
exercise of any right hereunder shall preclude any other or further exercise
thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and
<PAGE>
representations of Grantor contained in this Agreement shall be deemed to
have been suspended or waived by the Agent unless such suspension or waiver
is in writing signed by an officer of the Agent and directed to Grantor
specifying such suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable, and
if any clause or provision shall be held invalid and unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part hereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision of this Agreement in
any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except as specifically provided in PARAGRAPH 6 hereof or
by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby
irrevocably designates, constitutes and appoints the Agent (and all Persons
designated by the Agent in its sole and absolute discretion) as Grantor's
true and lawful attorney-in-fact, and authorizes the Agent and any of the
Agent's designees, in Grantor's or the Agent's name, to take any action and
execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
from and after the occurrence of a Default and the giving by the Agent of
notice to Grantor of the Agent's intention to enforce its rights and claims
against Grantor, to (i) endorse Grantor's name on all applications,
documents, papers and instruments necessary or desirable for the Agent in the
use of the Copyrights, the Licenses or copyrightable materials, (ii) assign,
pledge, convey or otherwise transfer title in or dispose of the Copyrights,
the Licenses or copyrightable materials to anyone on commercially reasonable
terms, (iii) grant or issue any exclusive or nonexclusive license under the
Copyrights or, to the extent permitted, under the Licenses, to anyone on
commercially reasonable terms, and (iv) take any other actions with respect
to the Copyrights, the Licenses or any copyrightable materials as the Agent
deems in its own or the Holders of Secured Obligations' best interest.
Grantor hereby ratifies all that such attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is coupled with an interest
and shall be irrevocable until all of the Secured Obligations shall have been
paid in full in cash and the Credit Agreement shall have been terminated.
Grantor acknowledges and agrees that this Agreement is not intended to limit
or restrict in any way the rights and remedies of the Agent or the other
Holders of Secured Obligations under the Security Agreement, but rather is
intended to facilitate the exercise of such rights and remedies.
The Agent shall have, in addition to all other rights and remedies
given it by the terms of this Agreement, all rights and remedies allowed by
law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Copyrights or the
Licenses may be located or deemed located. Upon the occurrence of a Default
and the election by the Agent to exercise any of its remedies under Section
9-504 or Section 9-505 of the Uniform Commercial Code with respect to the
Copyrights and Licenses, Grantor agrees to assign, convey and otherwise
transfer title in and to the Copyrights and the Licenses to the Agent or any
transferee of the Agent and to execute and deliver to the Agent or any such
transferee all such agreements, documents and instruments as may be
necessary, in the Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of the Agent's rights and remedies with
<PAGE>
respect to the Copyrights and the Licenses, whether established hereby, by
the Security Agreement, by any other agreements or by law, shall be
cumulative and may be exercised separately or concurrently. Notwithstanding
anything set forth herein to the contrary, it is hereby expressly agreed that
upon the occurrence of a Default, the Agent may exercise any of the rights
and remedies provided in this Agreement, the Security Agreement and any of
the other Loan Documents. Grantor agrees that any notification of intended
disposition of any of the Copyrights and Licenses required by law shall be
deemed reasonably and properly given if given at least ten (10) days before
such disposition; PROVIDED, HOWEVER, that the Agent may give any shorter
notice that is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Grantor and its successors and assigns, and shall inure to the benefit of
each of the Holders of Secured Obligations and its nominees, successors and
assigns. Grantor's successors and assigns shall include, without limitation,
a receiver, trustee or debtor-in-possession of or for Grantor; PROVIDED,
HOWEVER, that Grantor shall not voluntarily assign or transfer its rights or
obligations hereunder without the Agent's prior written consent.
17. GOVERNING LAW. This Agreement shall be construed and enforced
and the rights and duties of the parties shall be governed by in all respects
in accordance with the internal laws and decisions of the State of Illinois.
18. NOTICES. All notices or other communications hereunder shall
be given in the manner and to the address of the Borrower, in the case of the
Grantor, and to the address of the Agent, in each case, as set forth in the
Credit Agreement.
19. SECTION TITLES. The section titles herein are for convenience
of reference only, and shall not affect in any way the interpretation of any
of the provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
21. MERGER. This Agreement represents the final agreement of the
Grantor and the Agent with respect to the matters contained herein and may
not be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Grantor and the Agent or any Holder
of Secured Obligations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
[ ]
-------------------------------
By:
------------------------------
Name:
Title:
ATTEST:
By:
---------------------------
Title:
Accepted and agreed to as of the day and
year first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
--------------------
Name:
Title:
<PAGE>
Schedule A
to
Copyright Security Agreement
Dated as of February ___, 1998
REGISTERED COPYRIGHTS
None, except:
TITLE/DESCRIPTION REGISTRATION NO.
- ---------------------------------------------------
COPYRIGHT APPLICATIONS
None, except:
TITLE/DESCRIPTION APPLICATION DATE
- ---------------------------------------------------
OTHER COPYRIGHTS
None, except:
TITLE/DESCRIPTION
<PAGE>
Schedule B
to
Copyright Security Agreement
Dated as of February ___, 1998
LICENSE AGREEMENTS
None, except:
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Copyright Security Agreement was acknowledged before me
this ___ day of February, 1998, by _____________________, a ____________ of
[________________________], a ___________________ corporation, on behalf of such
corporation.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
-------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Copyright Security Agreement was acknowledged before me
this ___ day of February, 1998, by __________________, a ____________ of The
First National Bank of Chicago, a national banking association, on behalf of
such association.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
----------
<PAGE>
EXHIBIT 10-07
EXECUTION COPY
PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT ("Agreement") is made as of February
__, 1998, by and between [_______________], a __________ corporation
("Grantor"), and The First National Bank of Chicago, with its chief executive
office at One First National Plaza, Chicago, Illinois 60670, as the contractual
representative (the "Agent") for the "Holders of Secured Obligations" (as such
term is defined in the "Credit Agreement" defined below).
W I T N E S S E T H:
WHEREAS, IFR Systems, Inc., a Delaware corporation (the "Borrower"),
the Agent and certain financial institutions (the "Lenders") are parties to that
certain Credit Agreement of even date herewith (as the same may hereafter be
modified, amended, restated or supplemented from time to time, the "Credit
Agreement"), pursuant to which the Lenders may, from time to time, extend credit
to Borrower; and
WHEREAS, Grantor and the Agent are parties to that certain Security
Agreement of even date herewith (as the same may hereafter be modified, amended,
restated or supplemented from time to time, the "Security Agreement"), pursuant
to which Grantor has granted a security interest in certain of its assets to the
Agent for the benefit of the Agent and the Holders of Secured Obligations; and
WHEREAS, the Lenders have required Grantor to execute and deliver this
Agreement (i) in order to secure the prompt and complete payment, observance and
performance of all of the "Secured Obligations" (as defined in the Credit
Agreement) and (ii) as a condition precedent to any extension of credit to the
Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Grantor agrees as follows:
1. DEFINED TERMS.
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning specified
for such term in the Credit Agreement. Unless otherwise defined herein or in
the Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
<PAGE>
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and VICE VERSA, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. INCORPORATION OF THE CREDIT AGREEMENT. The Credit Agreement and
the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN PATENTS. To secure the complete and timely
payment, performance and satisfaction of all of the Secured Obligations, Grantor
hereby grants to the Agent, for the benefit of the Holders of Secured
Obligations, a security interest in, as and by way of a first mortgage and
security interest having priority over all other security interests, with power
of sale to the extent permitted by applicable law, all of Grantor's now owned or
existing and hereafter acquired or arising:
(i) patents and patent applications, and the inventions and
improvements described and claimed therein, including, without limitation,
those patents and patent applications listed on SCHEDULE A attached hereto
and made a part hereof, and (a) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable under
and with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments for
past or future infringements thereof, (c) the right to sue for past,
present and future infringements thereof, and (d) all of Grantor's rights
corresponding thereto throughout the world (all of the foregoing patents
and applications, together with the items described in CLAUSES (a)-(d) in
this PARAGRAPH 4(i) are sometimes hereinafter individually and/or
collectively referred to as the "Patents"); and
(ii) rights under or interest in any patent license agreements with
any other party, whether Grantor is a licensee or licensor under any such
license agreement, including, without limitation, those patent license
agreements listed on SCHEDULE B attached hereto and made a part hereof, and
the right to prepare for sale and sell any and all Inventory now or
hereafter owned by Grantor and now or hereafter covered by such licenses
(all of the foregoing are hereinafter referred to collectively as the
"Licenses"). Notwithstanding the foregoing provisions of this PARAGRAPH 4,
the Licenses shall not include any license agreement in effect as of the
date hereof which by its terms prohibits the grant of the security
contemplated by this Agreement; provided, however, that upon the
termination of such prohibitions for any reason whatsoever, the provisions
of this PARAGRAPH 4 shall be deemed to apply thereto automatically.
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without the
Agent's prior written consent, enter into any agreement, including, without
limitation, any license agreement, which is inconsistent with this Agreement,
and Grantor further agrees that it will not take any action, and will use its
best efforts not to permit any action to be taken by others, including, without
limitation, licensees, or fail to take any action, which would in any respect
affect the validity or enforcement of the rights transferred to the Agent under
this Agreement or the rights associated with the Patents or Licenses.
6. NEW PATENTS AND LICENSES. Grantor represents and warrants that,
from and after the Closing Date, (a) the Patents listed on SCHEDULE A include
all of the patents and patent
<PAGE>
applications now owned or held by Grantor, (b) the Licenses listed on SCHEDULE B
include all of the patent license agreements under which Grantor is the licensee
or licensor and (c) no liens, claims or security interests in such Patents and
Licenses have been granted by Grantor to any Person other than the Agent. If,
prior to the termination of this Agreement, Grantor shall (i) obtain rights to
any new patentable inventions, (ii) become entitled to the benefit of any
patent, patent application, license or any reissue, division, continuation,
renewal, extension or continuation-in-part of any Patent or any improvement on
any Patent or License, or (iii) enter into any new patent license agreement, the
provisions of PARAGRAPH 4 above shall automatically apply thereto. Grantor
shall give to the Agent written notice of events described in CLAUSES (i), (ii)
and (iii) of the preceding sentence promptly after the occurrence thereof, but
in any event not less frequently than on a quarterly basis. Grantor hereby
authorizes the Agent to modify this Agreement unilaterally (i) by amending
SCHEDULE A to include any future patents and patent applications, and by
amending SCHEDULE B to include any future patent license agreements, which are
Patents or Licenses under PARAGRAPH 4 above or under this PARAGRAPH 6, and (ii)
by filing, in addition to and not in substitution for this Agreement, a
duplicate original of this Agreement containing on Schedule A or B thereto, as
the case may be, such future patents, patent applications and license
agreements.
7. ROYALTIES. Grantor hereby agrees that the use by the Agent of
the Patents and Licenses as authorized hereunder in connection with the Agent's
exercise of its rights and remedies under PARAGRAPH 15 or pursuant to Section 17
of the Security Agreement shall be coextensive with Grantor's rights thereunder
and with respect thereto and without any liability for royalties or other
related charges from the Agent or the other Holders of Secured Obligations to
Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS.
The Agent may at all reasonable times (and at any time when an Unmatured Default
or Default exists) have access to, examine, audit, make copies (at Grantor's
expense) and extracts from and inspect Grantor's premises and examine Grantor's
books, records and operations relating to the Patents and Licenses; PROVIDED,
that in conducting such inspections and examinations, the Agent shall use
reasonable efforts not to disturb unnecessarily the conduct of Grantor's
ordinary business operations. Grantor agrees not to sell or assign its
respective interests in, or grant any license under, the Patents or the Licenses
without the prior and express written consent of the Agent.
9. NATURE AND CONTINUATION OF THE AGENT'S SECURITY INTEREST;
TERMINATION OF THE AGENT'S SECURITY INTEREST. This Agreement is made for
collateral security purposes only. This Agreement shall create a continuing
security interest in the Patents and Licenses and shall terminate only when the
Secured Obligations have been paid in full in cash and the Credit Agreement and
the Security Agreement have been terminated. When this Agreement has
terminated, the Agent shall promptly execute and deliver to Grantor, at
Grantor's expense, all termination statements and other instruments as may be
necessary or proper to terminate the Agent's security interest in the Patents
and the Licenses, subject to any disposition thereof which may have been made by
the Agent pursuant to this Agreement or the Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (i) prosecute
diligently any patent application that is part of the Patents pending as of the
date hereof or hereafter until the termination of this Agreement, and (ii) make
application on unpatented but patentable inventions. Grantor further agrees (i)
not to abandon any Patent or License without the prior written consent of the
Agent, and (ii) to use its best efforts to maintain in full force and effect the
Patents and the Licenses that are or shall be necessary or
<PAGE>
economically desirable in the operation of Grantor's business. Any expenses
incurred in connection with the foregoing shall be borne by Grantor. Neither
the Agent nor any of the Holders of Secured Obligations shall have any duty with
respect to the Patents and Licenses. Without limiting the generality of the
foregoing, neither the Agent nor any of the Holders of Secured Obligations shall
be under any obligation to take any steps necessary to preserve rights in the
Patents or Licenses against any other parties, but the Agent may do so at its
option from and after the occurrence of a Default, and all expenses incurred in
connection therewith shall be for the sole account of Grantor and shall be added
to the Secured Obligations secured hereby.
11. THE AGENT'S RIGHT TO SUE. From and after the occurrence of a
Default, the Agent shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Patents and the Licenses and, if the Agent
shall commence any such suit, Grantor shall, at the request of the Agent, do any
and all lawful acts and execute any and all proper documents required by the
Agent in aid of such enforcement. Grantor shall, upon demand, promptly
reimburse the Agent for all costs and expenses incurred by the Agent in the
exercise of its rights under this PARAGRAPH 11 (including, without limitation,
reasonable fees and expenses of attorneys and paralegals for the Agent).
12. WAIVERS. The Agent's failure, at any time or times hereafter, to
require strict performance by Grantor of any provision of this Agreement shall
not waive, affect or diminish any right of the Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Grantor and the Agent have such effect. No single or partial exercise of any
right hereunder shall preclude any other or further exercise thereof or the
exercise of any other right. None of the undertakings, agreements, warranties,
covenants and representations of Grantor contained in this Agreement shall be
deemed to have been suspended or waived by the Agent unless such suspension or
waiver is in writing signed by an officer of the Agent and directed to Grantor
specifying such suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except as specifically provided in PARAGRAPH 6 hereof or by
a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby
irrevocably designates, constitutes and appoints the Agent (and all Persons
designated by the Agent in its sole and absolute discretion) as Grantor's true
and lawful attorney-in-fact, and authorizes the Agent and any of the Agent's
designees, in Grantor's or the Agent's name, to take any action and execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, from and after the
occurrence of a Default and the giving by the Agent of notice to Grantor of the
Agent's intention to enforce its rights and claims against Grantor, to (i)
endorse Grantor's name on all applications, documents, papers and instruments
necessary or desirable for the Agent in the use of the Patents or the Licenses,
(ii) assign, pledge, convey or otherwise transfer
<PAGE>
title in or dispose of the Patents or the Licenses to anyone on commercially
reasonable terms, (iii) grant or issue any exclusive or nonexclusive license
under the Patents or, to the extent permitted, under the Licenses, to anyone on
commercially reasonable terms, and (iv) take any other actions with respect to
the Patents or the Licenses as the Agent deems in its own or the Holders of
Secured Obligations' best interest. Grantor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable until all of the
Secured Obligations shall have been paid in full in cash and the Credit
Agreement shall have been terminated. Grantor acknowledges and agrees that this
Agreement is not intended to limit or restrict in any way the rights and
remedies of the Agent or the other Holders of Secured Obligations under the
Security Agreement, but rather is intended to facilitate the exercise of such
rights and remedies.
The Agent shall have, in addition to all other rights and remedies
given it by the terms of this Agreement, all rights and remedies allowed by law
and the rights and remedies of a secured party under the Uniform Commercial Code
as enacted in any jurisdiction in which the Patents or the Licenses may be
located or deemed located. Upon the occurrence of a Default and the election by
the Agent to exercise any of its remedies under Section 9-504 or Section 9-505
of the Uniform Commercial Code with respect to the Patents and Licenses, Grantor
agrees to assign, convey and otherwise transfer title in and to the Patents and
the Licenses to the Agent or any transferee of the Agent and to execute and
deliver to the Agent or any such transferee all such agreements, documents and
instruments as may be necessary, in the Agent's sole discretion, to effect such
assignment, conveyance and transfer. All of the Agent's rights and remedies
with respect to the Patents and the Licenses, whether established hereby, by the
Security Agreement, by any other agreements or by law, shall be cumulative and
may be exercised separately or concurrently. Notwithstanding anything set forth
herein to the contrary, it is hereby expressly agreed that upon the occurrence
of a Default, the Agent may exercise any of the rights and remedies provided in
this Agreement, the Security Agreement and any of the other Loan Documents.
Grantor agrees that any notification of intended disposition of any of the
Patents and Licenses required by law shall be deemed reasonably and properly
given if given at least ten (10) days before such disposition; PROVIDED,
HOWEVER, that the Agent may give any shorter notice that is commercially
reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Grantor and its successors and assigns, and shall inure to the benefit of each
of the Holders of Secured Obligations and its nominees, successors and assigns.
Grantor's successors and assigns shall include, without limitation, a receiver,
trustee or debtor-in-possession of or for Grantor; PROVIDED, HOWEVER, that
Grantor shall not voluntarily assign or transfer its rights or obligations
hereunder without the Agent's prior written consent.
17. GOVERNING LAW. This Agreement shall be construed and enforced
and the rights and duties of the parties shall be governed by in all respects in
accordance with the internal laws and decisions of the State of Illinois.
18. NOTICES. All notices or other communications hereunder shall be
given in the manner and to the address of the Borrower, in the case of the
Grantor, and to the address of the Agent, in each case, as set forth in the
Credit Agreement.
19. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
<PAGE>
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
21. MERGER. This Agreement represents the final agreement of the
Grantor with respect to the matters contained herein and may not be contradicted
by evidence of prior or contemporaneous agreements, or subsequent oral
agreements, between the Grantor and the Agent or any Holder of Secured
Obligations.
22. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
[ ]
---------------------------------------------
By:
------------------------------------------
Name:
Title:
ATTEST:
By:
--------------------------------
Name:
Title:
Accepted and agreed to as
of the day and year first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
------------------------------------------
Name:
Title:
<PAGE>
Schedule A
to
Patent Security Agreement
Dated as of February ___, 1998
PATENTS
None, except:
Patent No. Issue Date Subject
- -----------------------------------------------
PATENT APPLICATIONS
None, except:
Serial No. Filing Date Subject
- -----------------------------------------------
<PAGE>
Schedule B
to
Patent Security Agreement
Dated as of February ___, 1998
LICENSE AGREEMENTS
None, except:
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Patent Security Agreement was acknowledged before me
this ___ day of February, 1998, by ___________________, a ____________ of
[________________], a __________ corporation, on behalf of such corporation.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
-------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Patent Security Agreement was acknowledged before me
this ___ day of February, 1998, by __________________, a _________________ of
The First National Bank of Chicago, a national banking association, on behalf of
such association.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
-------
<PAGE>
EXECUTION COPY
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is made as of
February 5, 1998, by and between PK TECHNOLOGY, INC., a Delaware corporation
("Grantor"), and The First National Bank of Chicago, as contractual
representative (the "Agent") for its benefit and the benefit of the "Holders
of Secured Obligations" (as such term is defined in the "Credit Agreement"
defined below).
W I T N E S S E T H:
WHEREAS, IFR Systems, Inc., a Delaware corporation (the
"Borrower"), the Agent and certain financial institutions from time to time
party thereto (the "Lenders") are parties to that certain Credit Agreement of
even date herewith (as the same may hereafter be modified, amended, restated
or supplemented from time to time, the "Credit Agreement"), pursuant to which
the Lenders may, from time to time, extend credit to Borrower; and
WHEREAS, Grantor and the Agent are parties to that certain Security
Agreement of even date herewith (as the same may hereafter be modified,
amended, restated or supplemented from time to time, the "Security
Agreement"), pursuant to which Grantor has granted a security interest in
certain of its assets to the Agent for the benefit of the Agent and the
Holders of Secured Obligations; and
WHEREAS, the Lenders have required Grantor to execute and deliver
this Agreement (i) in order to secure the prompt and complete payment,
observance and performance of all of the "Secured Obligations" (as defined in
the Credit Agreement) and (ii) as a condition precedent to any extension of
credit to the Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees as follows:
1. DEFINED TERMS.
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning
specified for such term in the Credit Agreement. Unless otherwise defined
herein or in the Credit Agreement, each capitalized term used herein that is
defined in the Security Agreement shall have the meaning specified for such
term in the Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular
<PAGE>
provision of this Agreement, and section references are to this Agreement
unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and VICE VERSA, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a
part hereof.
3. INCORPORATION OF THE CREDIT AGREEMENT. The Credit Agreement
and the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN TRADEMARKS. To secure the complete and
timely payment, performance and satisfaction of all of the Secured
Obligations, Grantor hereby grants to the Agent, for the benefit of the
Holders of Secured Obligations, a security interest in, as and by way of a
first mortgage and security interest having priority over all other security
interests, with power of sale to the extent permitted by applicable law, all
of Grantor's now owned or existing and hereafter acquired or arising:
(i) trademarks, registered trademarks, trademark applications, service
marks, registered service marks and service mark applications, including,
without limitation, the trademarks, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications listed on SCHEDULE A attached hereto and made a part hereof,
and (a) all renewals thereof, (b) all income, royalties, damages and
payments now and hereafter due and/or payable under and with respect
thereto, including, without limitation, payments under all licenses entered
into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (c) the right to sue for past, present
and future infringements and dilutions thereof, (d) the goodwill of
Grantor's business symbolized by the foregoing and connected therewith, and
(e) all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing trademarks, registered trademarks and trademark
applications, and service marks, registered service marks and service mark
applications, together with the items described in CLAUSES (a)-(e) in this
PARAGRAPH 4(i), are sometimes hereinafter individually and/or collectively
referred to as the "Trademarks"); and
(ii) rights under or interest in any trademark license agreements or
service mark license agreements with any other party, whether Grantor is a
licensee or licensor under any such license agreement, including, without
limitation, those trademark license agreements and service mark license
agreements listed on SCHEDULE B attached hereto and made a part hereof,
together with any goodwill connected with and symbolized by any such
trademark license agreements or service mark license agreements, and the
right to prepare for sale and sell any and all Inventory now or hereafter
owned by Grantor and now or hereafter covered by such licenses (all of the
foregoing are hereinafter referred to collectively as the "Licenses").
Notwithstanding the foregoing provisions of this SECTION 4, the Licenses
shall not include any license agreement in effect as of the date hereof
which by its terms prohibits the grant of the security contemplated by this
Agreement; provided, however, that upon the termination of such
prohibitions for any reason
<PAGE>
whatsoever, the provisions of this SECTION 4 shall be deemed to apply
thereto automatically.
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without
the Agent's prior written consent, enter into any agreement, including,
without limitation, any license agreement, which is inconsistent with this
Agreement, and Grantor further agrees that it will not take any action, and
will use its best efforts not to permit any action to be taken by others,
including, without limitation, licensees, or fail to take any action, which
would in any respect affect the validity or enforcement of the rights
transferred to the Agent under this Agreement or the rights associated with
the Trademarks or Licenses.
6. NEW TRADEMARKS AND LICENSES. Grantor represents and warrants
that, from and after the Closing Date, (a) the Trademarks listed on SCHEDULE
A include all of the trademarks, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications now owned or held by Grantor, (b) the Licenses listed on
SCHEDULE B include all of the trademark license agreements and service mark
license agreements under which Grantor is the licensee or licensor and (c) no
liens, claims or security interests in such Trademarks and Licenses have been
granted by Grantor to any Person other than the Agent. If, prior to the
termination of this Agreement, Grantor shall (i) obtain rights to any new
trademarks, registered trademarks, trademark applications, service marks,
registered service marks or service mark applications, (ii) become entitled
to the benefit of any trademarks, registered trademarks, trademark
applications, trademark licenses, trademark license renewals, service marks,
registered service marks, service mark applications, service mark licenses or
service mark license renewals whether as licensee or licensor, or (iii) enter
into any new trademark license agreement or service mark license agreement,
the provisions of PARAGRAPH 4 above shall automatically apply thereto.
Grantor shall give to the Agent written notice of events described in CLAUSES
(i), (ii) and (iii) of the preceding sentence promptly after the occurrence
thereof, but in any event not less frequently than on a quarterly basis.
Grantor hereby authorizes the Agent to modify this Agreement unilaterally (i)
by amending SCHEDULE A to include any future trademarks, registered
trademarks, trademark applications, service marks, registered service marks
and service mark applications and by amending SCHEDULE B to include any
future trademark license agreements and service mark license agreements,
which are Trademarks or Licenses under PARAGRAPH 4 above or under this
PARAGRAPH 6, and (ii) by filing, in addition to and not in substitution for
this Agreement, a duplicate original of this Agreement containing on Schedule
A or B thereto, as the case may be, such future trademarks, registered
trademarks, trademark applications, service marks, registered service marks
and service mark applications, and trademark license agreements and service
mark license agreements.
7. ROYALTIES. Grantor hereby agrees that the use by the Agent of
the Trademarks and Licenses as authorized hereunder in connection with the
Agent's exercise of its rights and remedies under PARAGRAPH 15 or pursuant to
Section 17 of the Security Agreement shall be coextensive with Grantor's
rights thereunder and with respect thereto and without any liability for
royalties or other related charges from the Agent or the other Holders of
Secured Obligations to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS.
The Agent may at all reasonable times (and at any time when an Unmatured
Default or Default exists) have access to, examine, audit, make copies (at
Grantor's expense) and extracts from and inspect
<PAGE>
Grantor's premises and examine Grantor's books, records and operations
relating to the Trademarks and Licenses; PROVIDED, that in conducting such
inspections and examinations, the Agent shall use reasonable efforts not to
disturb unnecessarily the conduct of Grantor's ordinary business operations.
From and after the occurrence of a Default, Grantor agrees that the Agent, or
a conservator appointed by the Agent, shall have the right to establish such
reasonable additional product quality controls as the Agent or such
conservator, in its sole and absolute judgment, may deem necessary to assure
maintenance of the quality of products sold by Grantor under the Trademarks
and the Licenses or in connection with which such Trademarks and Licenses are
used. Grantor agrees (i) not to sell or assign its respective interests in,
or grant any license under, the Trademarks or the Licenses without the prior
and express written consent of the Agent, (ii) to maintain the quality of
such products as of the date hereof, and (iii) not to change the quality of
such products in any material respect without the Agent's prior and express
written consent.
9. NATURE AND CONTINUATION OF THE AGENT'S SECURITY INTEREST;
TERMINATION OF THE AGENT'S SECURITY INTEREST. This Agreement is made for
collateral security purposes only. This Agreement shall create a continuing
security interest in the Trademarks and Licenses and shall terminate only
when the Secured Obligations have been paid in full in cash and the Credit
Agreement and the Security Agreement have been terminated. When this
Agreement has terminated, the Agent shall promptly execute and deliver to
Grantor, at Grantor's expense, all termination statements and other
instruments as may be necessary or proper to terminate the Agent's security
interest in the Trademarks and the Licenses, subject to any disposition
thereof which may have been made by the Agent pursuant to this Agreement or
the Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (i) prosecute
diligently any trademark application or service mark application that is part
of the Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement, and (ii) make application for trademarks or
service marks. Grantor further agrees (i) not to abandon any Trademark or
License without the prior written consent of the Agent, and (ii) to use its
best efforts to maintain in full force and effect the Trademarks and the
Licenses that are or shall be necessary or economically desirable in the
operation of Grantor's business. Any expenses incurred in connection with
the foregoing shall be borne by Grantor. Neither the Agent nor any of the
Holders of Secured Obligations shall have any duty with respect to the
Trademarks and Licenses. Without limiting the generality of the foregoing,
neither the Agent nor any of the Holders of Secured Obligations shall be
under any obligation to take any steps necessary to preserve rights in the
Trademarks or Licenses against any other parties, but the Agent may do so at
its option from and after the occurrence of a Default, and all expenses
incurred in connection therewith shall be for the sole account of Grantor and
shall be added to the Secured Obligations secured hereby.
11. THE AGENT'S RIGHT TO SUE. From and after the occurrence of a
Default, the Agent shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Trademarks and the Licenses and, if the
Agent shall commence any such suit, Grantor shall, at the request of the
Agent, do any and all lawful acts and execute any and all proper documents
required by the Agent in aid of such enforcement. Grantor shall, upon
demand, promptly reimburse the Agent for all costs and expenses incurred by
the Agent in the exercise of its rights under this PARAGRAPH 11 (including,
without limitation, reasonable fees and expenses of attorneys and paralegals
for the Agent).
<PAGE>
12. WAIVERS. The Agent's failure, at any time or times hereafter,
to require strict performance by Grantor of any provision of this Agreement
shall not waive, affect or diminish any right of the Agent thereafter to
demand strict compliance and performance therewith nor shall any course of
dealing between Grantor and the Agent have such effect. No single or partial
exercise of any right hereunder shall preclude any other or further exercise
thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and representations of Grantor contained in
this Agreement shall be deemed to have been suspended or waived by the Agent
unless such suspension or waiver is in writing signed by an officer of the
Agent and directed to Grantor specifying such suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable, and
if any clause or provision shall be held invalid and unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part hereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision of this Agreement in
any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except as specifically provided in PARAGRAPH 6 hereof or
by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby
irrevocably designates, constitutes and appoints the Agent (and all Persons
designated by the Agent in its sole and absolute discretion) as Grantor's
true and lawful attorney-in-fact, and authorizes the Agent and any of the
Agent's designees, in Grantor's or the Agent's name, to take any action and
execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
from and after the occurrence of a Default and the giving by the Agent of
notice to Grantor of the Agent's intention to enforce its rights and claims
against Grantor, to (i) endorse Grantor's name on all applications,
documents, papers and instruments necessary or desirable for the Agent in the
use of the Trademarks or the Licenses, (ii) assign, pledge, convey or
otherwise transfer title in or dispose of the Trademarks or the Licenses to
anyone on commercially reasonable terms, (iii) grant or issue any exclusive
or nonexclusive license under the Trademarks or, to the extent permitted,
under the Licenses, to anyone on commercially reasonable terms, and (iv) take
any other actions with respect to the Trademarks or the Licenses as the Agent
deems in its own or the Holders of Secured Obligations' best interest.
Grantor hereby ratifies all that such attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is coupled with an interest
and shall be irrevocable until all of the Obligations shall have been paid in
full in cash and the Credit Agreement shall have been terminated. Grantor
acknowledges and agrees that this Agreement is not intended to limit or
restrict in any way the rights and remedies of the Agent or the other Holders
of Secured Obligations under the Security Agreement, but rather is intended
to facilitate the exercise of such rights and remedies.
The Agent shall have, in addition to all other rights and remedies
given it by the terms of this Agreement, all rights and remedies allowed by
law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Trademarks or the
Licenses may be located or deemed located. Upon the occurrence of a Default
<PAGE>
and the election by the Agent to exercise any of its remedies under Section
9-504 or Section 9-505 of the Uniform Commercial Code with respect to the
Trademarks and Licenses, Grantor agrees to assign, convey and otherwise
transfer title in and to the Trademarks and the Licenses to the Agent or any
transferee of the Agent and to execute and deliver to the Agent or any such
transferee all such agreements, documents and instruments as may be
necessary, in the Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of the Agent's rights and remedies with respect
to the Trademarks and the Licenses, whether established hereby, by the
Security Agreement, by any other agreements or by law, shall be cumulative
and may be exercised separately or concurrently. Notwithstanding anything set
forth herein to the contrary, it is hereby expressly agreed that upon the
occurrence of a Default, the Agent may exercise any of the rights and
remedies provided in this Agreement, the Security Agreement and any of the
other Loan Documents. Grantor agrees that any notification of intended
disposition of any of the Trademarks and Licenses required by law shall be
deemed reasonably and properly given if given at least ten (10) days before
such disposition; PROVIDED, HOWEVER, that the Agent may give any shorter
notice that is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Grantor and its successors and assigns, and shall inure to the benefit of
each of the Holders of Secured Obligations and its nominees, successors and
assigns. Grantor's successors and assigns shall include, without limitation,
a receiver, trustee or debtor-in-possession of or for Grantor; PROVIDED,
HOWEVER, that Grantor shall not voluntarily assign or transfer its rights or
obligations hereunder without the Agent's prior written consent.
17. GOVERNING LAW. This Agreement shall be construed and enforced
and the rights and duties of the parties shall be governed by in all respects
in accordance with the internal laws and decisions of the State of Illinois.
18. NOTICES. All notices or other communications hereunder shall
be given in the manner and to the address of the Borrower, in the case of the
Grantor, and to the address of the Agent, in each case, as set forth in the
Credit Agreement.
19. SECTION TITLES. The section titles herein are for convenience
of reference only, and shall not affect in any way the interpretation of any
of the provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
21. MERGER. This Agreement represents the final agreement of the
Grantor and the Agent with respect to the matters contained herein and may not
be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Grantor and the Agent or any Holder of
Secured Obligations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
[ ]
------------------------------
By:
------------------------------
Name:
Title:
ATTEST:
By:
---------------------------
Title:
Accepted and agreed to as of the day and
year first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
--------------------
Name:
Title:
<PAGE>
Schedule A
to
Trademark Security Agreement
Dated as of February ___, 1998
TRADEMARKS
None, except:
TRADEMARK REGISTRATION DATE REGISTRATION NO.
- ----------------------------------------------------------------------
TRADEMARK AND SERVICE MARK APPLICATIONS
None, except:
TRADEMARK REGISTRATION DATE REGISTRATION NO.
- ----------------------------------------------------------------------
<PAGE>
Schedule B
to
Trademark Security Agreement
Dated as of February ___, 1998
LICENSE AGREEMENTS
None, except:
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Trademark Security Agreement was acknowledged before
me this ___ day of February, 1998, by _____________________, a ____________
of [_______________________], a [___________] corporation, on behalf of such
corporation.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
-------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
The foregoing Trademark Security Agreement was acknowledged before
me this ___ day of February, 1998, by _______________, a
__________________________________ of The First National Bank of Chicago, a
national banking association, on behalf of such association.
-----------------------------
Notary Public
Cook County, Illinois
My commission expires:
----------
